'Low KYC' norm to help mobile wallets retain their customers

MUMBAI: In a move set to bring relief to scores of mobile wallet firms such as Paytm, PhonePe, Amazon Pay and their several million users, the Reserve Bank of India (RBI) will allow wallet service providers to continue operating their millions of non-compliant know-your- customer (KYC) accounts which earlier faced cancellation after placing certain transnational limitations.This will be done by a mechanism giving customers an option to convert their ‘minimum KYC’ accounts to the central bank’s newly introduced ‘low KYC’ PPI accounts, said four people with direct knowledge of the matter.An estimated over 200 million mobile wallets ran the risk of being cancelled by the regulators, once the deadline to upgrade their non-compliant accounts to ‘full KYC’ accounts expires on February 29.These are mostly the accounts whose KYC authentications through Aadhaar were ruled invalid by the Supreme Court by its landmark 2018 verdict. The central bank had earlier notified that all customer accounts which were vetted using UIDAI database before the Aadhaar verdict would be retrospectively considered invalid, and thereby cancelled after the top court ruled that Aadhaar could not be used as a binding document for financial institutions to complete customer KYC.While the use of Aadhaar for vetting of customers was later made consent-based for banks, the nonbanks including wallet operators are prohibited from conducting vetting credentials through the UIDAI database. “Customer consent will be sought before the conversion of the accounts happen,” Paytm CEO Vijay Shekhar Sharma told ET in an interview. “We will announce the details of how this conversion will happen soon. These are typically accounts where KYC was already performed but were later ruled invalid due to restrictions on Aadhaar use.”Several payment companies had earlier raised concerns with both the regulators and the government that without relaxations on guidelines of these contentious accounts, their business models would take a major hit.73948869 For example, the cost of compliance for Paytm alone with over 100-million minimum KYC accounts would have exceeded Rs 2,500 crore as the cost of KYC for each customer can be as high as Rs 250 to Rs 300, since an agent has to physically reach out to the customer. The deadline for compliance aftet the Aadhar verdict had already been extended twice; once in February 2018 and once in August 2019.“No more deadline extensions will be provided after this,” said one of the sources cited above. “The users of minimum KYC wallet accounts which are currently operational but are set to be cancelled can be given a choice for conversion to low KYC PPI devices with a monthly transaction limit of Rs 10,000.”In December, the central bank introduced a new Prepaid Payment Instrument (PPI) which will come with a monthly rechargeable limit of Rs 10,000 and can be used only for making retail payments.The instrument can be issued both by banks and non-banks wallet operators. The banking regulator had said that customers seeking to open their PPI accounts can do so by using an OTP sent to the user’s verified mobile number and a digital identification document recognised by the Department of Revenue.

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