Since 1st March 2018, there has been a slump in the volume of e-commerce transactions– using PPI (Prepaid Payment Instruments)– following the expiry of the 28th February 2018 KYC authentication deadline for making sure that all such accounts are in compliance with the know your customer norms. In short, ever since RBI made it mandatory, it has been observed that KYC affects mobile wallets.
Since the deadline, it can very well be seen that users are not interested in mobile wallets anymore. It is due to the stringent KYC process. According to reports stated in online publication Trak, mobile wallet transactions have gone down by 95%.
Also read – How To Get Re-KYC Done For Bank Accounts
KYC is a process through which financial institutions authenticate customer information to ensure that services are not misused.
On 11th October 2017, the Reserve Bank of India passed norms for directing PPIs to complete KYC verification by 31st December 2017. Later on, the deadline was extended until the end of February 2018. A letter was sent to the RBI by the Payments Council (PCI). The letter wanted the withdrawal of full KYC for PPIs. It also asked to remove the mandatory “unique identification number” of wallet holders up to Rs. 10,000. But the demands weren’t accepted. According to the RBI, sufficient time had been provided to meet the prescribed norms and payment instruments had time to abide by the guidelines. But users would not lose their balance amount even if KYC was not completed, the central bank added. According to RBI, meeting these guidelines is necessary to make India a cashless economy.
Minimum KYC comes with customers not being able to send money to other wallets or bank accounts. They also can’t keep more than Rs. 10,000 in their wallet.
KYC Affects Mobile Wallets: The Main Problem
The main problem lies in the stringent process which includes the need for an identity card like Aadhaar or PAN card. The RBI hasn’t introduced any perks or benefits for completing KYC verifications. So the majority of the people have shifted their interest from the concept of a cashless economy.
Experts and analysts fear and believe that KYC affects mobile wallets, and the imagined cashless economy would return to total cash transactions. But according to the RBI, PPI transactions increased in January 2018 (113.6 million), when compared to December (99.1 million).
Amazon India has told online publication Trak, “Cash loads have reduced by 95%. This will mean lower digital payment adoption in the long run, especially as we expand further into smaller cities and towns. We are losing an opportunity to engage customers who typically do not use electronic instruments.”