With the introduction of  serious laws every now and then, Indian government seems to be on roll. Supreme Court’s latest verdict on banning the practice of using and storing Aadhaar data by private companies for KYC and the controversies related to it has become so serious that by the end of February, most of the mobile wallets in India may stop functioning. This can cause freezing of funds.


Why is this happening?

In the month of October 2017, The Reserve Bank Of India had said that every Prepaid Payment Instrument (also called as mobile wallet) has to undergo through the process of completing KYC or Know Your Customer for their customers and the  final deadline for this activity was set as March 1st, 2019. This lead every mobile wallet company to focus on Aadhaar based KYC and they were even successful in completing KYC for more than 70% of their users.

But, after Supreme Court’s verdict on banning the use and storage of Aadhaar details in October last year, every plan seems to be a diminishing. Prepaid Payment instruments cannot use Aadhaar details for KYC, and this means, KYC process will come to a squealing halt.

When we talk of the present situation, more than 95% of mobile wallet users have no KYC, and as per RBI’s deadline, they can be made to stop functioning by the end of March 2019.

So, what’s the solution?

One solution to this problem can be alternate KYC for customers, which can be completed without using Aadhaar details. For this, companies need to encourage their users/consumers to provide their PAN Card/Driving License or other valid identity proofs. Also, live video-based KYC is being taken into consideration. But, it appears that nothing is clear to the companies in this regard, and they seem confused.

How will Paytm survive?kyc

Despite all these terrible news to destroy your day, we have a good news for you! Among the biggest name in mobile wallet market, Paytm, can survive this turmoil. This is because Paytm already has a large number of field agents, who are equipped with biometric machines and other gadgets to complete KYC process via offline route for users, and 70% of all Paytm users have completed the KYC process.

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However, other mobile wallet companies like PhonePe, Freecharge, MobiKwik etc. are still waiting for confirmation from the government regarding alternative KYC methods.

Breach of Law

It is evident that despite Supreme Court’s verdict, various companies like Flipkart and Amazon are continuing to insist users on providing their Aadhaar information and in the absence of clear directives, businesses continue to ignore the court.

Due to lack of awareness, majority of the SIM card activation in rural India is still being done through Aadhaar authentication only.

Aadhaar cannot identify anyone anymore?

UIDAI in a RTI reply has accepted that it does not certify the use of Aadhaar data nor does it certify the data associated with any Aadhaar number and since identification is a two-way process, Aadhaar by its nature cannot identify anyone.

Hence, the prepaid payment instruments in order to make their system operational in future have to think of alternative methods other than Aadhaar to complete the KYC process.

About the Author

Megha Harsh serves as a content writer at The Ideaz Factory. She has been a student of English Journalism at the Indian Institute of mass communication. A writer by day and reader by night, she is loathe to discuss herself in third person. In addition to writing blogs, she also has interest in writing poems.