KYC for Digital Wallets

Digital wallets have been on the Indian market for almost a decade. With the widespread use of smartphones and better, cheaper internet connectivity, an increasing number of citizens have taken to platforms such as Paytm, Mobikwik and more.

The allure with digital wallets so far lies with the simple pay-as-you-go concept. Transactions are instantaneous and considered secure. However, the RBI seems to have thrown a wrench in the works with their new set of guidelines that directs providers to implement the full spectrum of KYC controls.

Growth unencumbered

Mobikwik announced earlier in 2017 that it has close to 55 million consumers and over 1.5 million merchants across multiple categories.

Most users of e-commerce payments platforms are blue-collar workers – taxi drivers and daily wage labourers. For them, a single click verification of their phone number is a quick way of managing an account. Their primary use for digital wallets is to handle their daily remittances. In such cases, a full-fledged bank account with a multitude of features may not be of much use.

Guidelines and consequences

Among other requirements, the new guidelines direct e-wallet providers to implement full-KYC for all users. Additionally, the reporting requirements will also be brought up to banking standards; any transaction, whether remittance or purchase through platform, over INR 10,000/- calls for a CTR (Currency Transaction Report).

What’s really worrying to most providers is the pressing timelines. The body of authority has set a hard deadline of Dec 31 for wallet users operating over the minimum slab (INR 10,000/-), and those under the threshold will have to complete formalities within the next 12 months. Most companies neither have the expertise nor the manpower to successfully complete the task ahead of them.

Outcry has not been subtle with many executives hoping to sway the RBI with their arguments. Primarily, they believe that a complex sign up process can change their solutions from an inclusive and transparent platforms, into convoluted and expensive solutions for their primary consumer base.

The final word

In a cashless and completely digital economy envisioned by the government, there is a strong need for e-commerce players who can simplify the process for the masses. Establishing compliance similar to those for banks will entirely defeat the purpose; users would rather just wait in line and open a bank account. While it may be time to cut e-wallets some slack (after all, they were the lifeline of the country during the 2016 demonetization), governmental agencies need to develop less intrusive and complicated ways of fulfilling their watchdog roles.