Aadhaar eKYC: The logistics of re-verification might put a lot of strain on telcos

The Telecom Ministry has been instructed by the government to start the process of linking all existing and future mobile phone numbers to Aadhaar data. The phone numbers will be re-verified with the Aadhaar information. This process will be applicable for both prepaid as well as postpaid customers through Aadhaar based eKYC process according to a notification by the telecom department.

This process is easier said than done, especially for the existing mobile phone users, and is a challenge for telcos that have not been using Aadhaar-based eKYC process for new registrations. According to the Cellular Operators Association of India (COAI), its members, which include Bharti Airtel, Vodafone, Idea Cellular, Reliance Jio, among others, are expected to meet this week to discuss the process of rolling out the verification process for the same.

Image: Reuters

Image: Reuters

Challenges ahead

With a 6 February 2018 deadline looming ahead for telecom operators to get their act in place, there will be huge costs involved. According to COAI, one is looking at Rs 1,000 cr for infrastructure and training, which will have to be paid by operators. Rajan S Mathews, the Director General of COAI, has stated that this will reduce the issue of fake subscribers. He also mentioned that it will ensure that the Aadhaar-based eKYC verification is done by next year, else they would request an extension from the Department of Telecommunications (DoT).

"It is tough to estimate the costs of doing this, but it will be significant, likely in the billions. There is some capex [capital expense] likely involved if billing systems have to be integrated with Aadhaar. Then there is the manual verification process," says Shiv Putcha, associate research director, Consumer Mobility at IDC.

Considering that Aadhaar is already being used as an address as well as an identity proof for various verification processes, it was only a matter of time before telecom companies were also asked to follow the same. Among the telcos operating in India, Reliance Jio has a clear head start in this direction as it had begun the process of Aadhaar based eKYC back in September. According to Reliance Industries Chairman and Managing Director Mukesh Ambani, Aadhaar helped Jio acquire close to a million customers in a day.

In April last year, the then telecom minister RS Sharma had said that telcos could get the activation costs for a new mobile connection down to zero if eKYC of Aadhaar was implemented, as the authentication then happens digitally.

Raja Lahiri, partner, Grant Thornton says that it shouldn't be an uphill task for the telcos to get mobile numbers re-verified with Aadhaar numbers.

"The percentage of Indian population on Aadhaar is quite significant, so getting their data should not be difficult. Aadhaar is now being used in several places, so from that population, getting the data shouldn’t be an issue. The challenges lie with those that don’t have an Aadhaar number or if there are inconsistencies. In those cases, the telcos will have to spend some extra effort to ensure smooth operations," said Lahiri.

According to Anshul Gupta, research director at Gartner, there has been a large scale re-verification exercise in the past as well, where the operators were asked to re-verify mobile subscribers along with the need to store physical and digital copies of customer forms.

"With this new re-verification announcement using Aadhaar card, there will definitely be an added cost attached for the carriers. At this point, the industry is going through a lot of challenges, especially with the price war that is on for 4G services. Carriers are struggling to maintain their profitability. At this point, if this additional cost comes in, then it will definitely affect the bottomline of the telcos," said Gupta.

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What do the telcos have to do?

The Aadhaar based eKYC verification process is something that has to be initiated by the telecom operator. According to the guidelines laid down by DoT the eKYC based verification is being included to ensure that the identity and the address of the mobile phone subscriber is verified. Telcos are expected to inform their existing subscribers about the re-verification process through print and electronic media as well as through SMS, along with uploading the complete information on their websites as well.

The process of re-verification begins with the licensee (telco/operator) sending a 'Verification Code' to the mobile number of the subscriber. "Before initiating the eKYC process, the licensee shall verify the 'Verification Code' from the subscriber so as to confirm that the SIM card of the mobile connection is physically available with the subscriber. Only after this activity, the licensee shall proceed for the eKYC process", say the guidelines. This is being done to ensure that the eKYC re-verification process is not being initiated for an inactive number which may not get any response from the subscriber.

After the eKYC process is complete and the old customer data is overwritten with new details from Aadhaar, the licensee is expected to seek confirmation from the subscriber about the re-verification of his/her number within 24 hours through SMS. If there is no response for three days, then the licensee is expected to consider it as re-verified and the old consumer acquisition forms can be discarded unless it is asked by a legal agency to maintain them.

Customers with only data SIMs or more than one mobile connections are covered

If you have more than one mobile number, you are still covered. The operator is eligible to re-verify more than one mobile connection issued by it in one licensed service area through a single eKYC. But bulk verification will not be allowed. If you are converting the same number from a prepaid to postpaid connection, then the re-verification isn't required if it is already done.

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Also those of you who use a SIM only for a data connection (and do not have calling or SMS facility activated), will be expected to provide an additional mobile number which is linked to the data SIM, for eKYC purposes.

According to Gupta, there are many issues that still need to be clarified with regards to the re-verification. "For instance if you look at a big corporate scenario where phone numbers are being used by the company. These numbers may not be owned by a person, but by the company, so how will re-verification by Aadhaar be implemented? The company would maintain records as to who is using which SIM, but then how will that get re-verified using Aadhaar is still something to be answered," said Gupta.

Then there is the prospect of visitors and tourists and how their SIM purchase patterns will be affected. The DoT directive only says that the eKYC process for outstation customers and bulk connections will be issued separately.

The opportunities for telecom operators

According to Lahiri, it is very difficult to predict the opportunities for telcos when this linking of a phone number with an Aadhaar number eventually occurs. According to him, mobile will serve as the backbone for future transactions.

"Mobile is going to be the device for every transaction going forward. With digital payments being on, it will obviously increase many fold. So, the key would be what is the sole authentication number for that. Aadhaar will pay a huge role in that, in the sense that it will help verify a person easily, as all that data is attached to the Aadhaar number," said Lahiri.

Gupta agrees, saying it is very difficult to gauge what exactly the opportunity for the telecom operators with this re-verification scheme is. But he says there is definitely something to gain for the consumers.

"It makes sense from the financial inclusion perspective. In rural and remote areas where not a lot of people have easy access to a bank branch, they might have an account but cannot do immediate transactions, but by using a mobile phone they can easily do it. If the mobile numbers are linked with Aadhaar, then it adds a layer of security which will enable these financial transactions. Many govt subsidies are also linked with Aadhaar, so people can access those from their mobile phone," said Gupta.

According to Putcha, unless the telcos get access to the entire view of the customer through the Aadhaar platform, it is doubtful if they can provide any additional benefits over and above what they currently do.

"The biggest benefit would be in terms of KYC and compliance, as opposed to offering value-added services. To my mind, the compensation in the future would come from reduced compliance costs and better visibility into the customer base," said Putcha.

So there are some challenges associated with the Aadhaar eKYC for telcos who will be starting it from scratch. We will get to know how telecom players are planning to address this new directive after their scheduled meeting this week.

Disclaimer: Reliance Jio is owned by Reliance Industries, who also own Network18, the publisher of Firstpost and tech2.


Published Date: Mar 29, 2017 10:03 am | Updated Date: Mar 29, 2017 10:03 am