Paytm wants minimum KYC (Know Your Customer) norms for mobile wallet users to stay, even after August 31, when the Reserve Bank of India’s mandatory full KYC requirements for mobile wallets will kick in, according to an Economic Times report. Minimum KYC wallets are those for which the operator uses only the user’s mobile number and any one government identification number to authenticate the account. According to Paytm’s website, such a KYC is valid only for 18 months. A full KYC, on the other hand, requires an in-person verification with your PAN card and proof of address. Around 50% of Paytm’s entire user base are still on minimum-KYC accounts, the ET report says.
Doing away with minimum KYC is not at all customer friendly, according to Deepak Abbot, senior vice president, Paytm. He says that “as long as users are comfortable with limitations” with minimum KYC wallets, there is no harm in allowing them to operate after August 31. Paytm has been in touch with the RBI and is banking on the recommendations made by the Nandan Nilekani-led committee for deepening digital Payments (see below) to discuss the issue.
Why Paytm wants minimum KYC to stay
In short, because performing a full KYC is expensive and could also alienate many users of mobile wallets. Abbot said that the average cost of doing an in-person KYC is anywhere between ₹260 and ₹270 per customer, and for a firm like Paytm, which has 100 million MAUs, the resultant cost will be around ₹2,500 crore. According to RBI’s master circular on prepaid payment instruments (PPI), released in February, users who do not complete the full KYC process will not be allowed to load money into their wallets. PPI operators have also been directed to give a one-time option to users to transfer their outstanding wallet balance to bank accounts without any charges. Wallet companies are now faced with a physical KYC compliance and competition from simpler payment options such as UPI. The initial deadline for complying with KYC requirements was February 28, 2019, which was later postponed to August 31, 2019, following consultation with stakeholders.
Nandan Nilekani panel’s recommendations on simplifying KYC
Abbot said Paytm has always supported “low value wallets to be KYC exempt”, which is a proposal that the Nandan Nilekani-led committee on deepening digital payments also made (read a summary of the committee’s recommendations here). The committee made three separate recommendations for simplifying the KYC process:
Recommendation 55: Simplify KYC/CDD processes for uses cases like:
- Opening a second financial account with the same institution or a sister institution.
- Opening a wallet account by loading it from a KYC-compliant bank account.
- Opening a mutual fund account by funding it from a KYC compliant bank account.
- Purchasing an insurance policy by funding it from a KYC-compliant bank account belonging to the proposer.
Recommendation 61: Enable use of digital documents for KYC. The PMLA rules must be modified to recognise Officially Valid documents that are digitally signed by the issuer as original documents. Issuers of these documents (such as PAN, Passport) must be encouraged to provide these to users.
Recommendation 70: Simplify mobility through NCMC Wallet, with no KYC and a limited use case:
- Maximum value in the wallet: ₹2,000
- Maximum spending in a month: ₹10,000
- May be used only for proximity payments
- May be loaded with cash or from a bank account
- May be used at merchant locations, into a merchant bank account