Digital wallets may become invalid by end-February due to non-compliance with RBI's KYC norms

Lakhs of digital wallets in the country could become invalid by 28 February, 2019 as these firms are reportedly facing difficulties complying with the Reserve Bank of India's (RBI) Know Your Customer (KYC) norms, a media report said.

According to The Times of India report, around 80 percent of wallet users have not yet complied with KYC.

Last year, the Supreme Court struck down Section 57 of Aadhaar Act permitting private entities to avail Aadhaar data and ruled that Aadhaar authentication data could not be stored for more than six months.

Since there is no option of e-KYC for digital wallets and the RBI has not said anything clearly about the alternate KYC mechanisms, the firms are now in a limbo.

In order to continue using digital wallets, users now have to complete KYC process which involves submission of various documents, including ID proof and address proof.

In October 2017, the RBI had issued a circular mandating digital wallets to complete their full ‘KYC’ process by 31 December, 2017. The deadline was later extended up to 28 February 2018 at the request of certain prepaid payment instruments (PPI) issuers.

Digital wallets may become invalid by end-February due to non-compliance with RBIs KYC norms

Representational image. tech2

RBI on its website, however, said, "A ‘minimum detail PPI’ can be held for a maximum period of 12 months only. These 12 months shall be counted from the day of opening of such a PPI. Within this period of 12 months, it has to be converted into KYC compliant PPIs failing which, no further credit in such PPI shall be allowed. However, the PPI holder shall be allowed to use the available balance. All such PPIs existing as on 28 February, 2018 shall be converted into KYC compliant PPIs by 28 February, 2019.

According to media reports, PPI issuers were feeling that KYC requirement was very challenging and if the guidelines were to be implemented, they feared losing business as 90 percent customers have been onboarded using the minimum KYC, i.e. by giving the telephone number.

The PPI industry also feels that if KYC is done for mobile phones, the same should take care of security concerns.

However, the RBI recently issued guidelines limiting consumers' liability in case of unauthorised transactions that have taken place from their mobile wallets.

The guideline, according to this Economic Times report, said that if an unauthorised transaction takes place from the customer's mobile wallet due to the negligence of PPI issuer, then, in that case, the customer's liability will be zero.

"The guidelines are designed to strengthen safety and security of transactions and customer protection," Deputy governor of RBI, BP Kanungo had said in February last year, adding KYC requirements are necessary to usher in interoperability.

The RBI wants to make interoperability between PPI wallets and also with bank accounts and cards possible.

Apart from paying for the purchase of goods and services, PPIs are used extensively for remittances currently, which offers a very lucrative business opportunity for agencies involved in carrying out remittances.

In October 2018, the RBI issued guidelines to facilitate payments among different mobile wallets, a move aimed at promoting digital transactions.

As per the road-map laid down in 2017, interoperability of all KYC-compliant Prepaid Payment Instruments (PPIs) was to be enabled in three phases - interoperability of PPIs issued in the form of wallets through Unified Payments Interface (UPI), interoperability between wallets and bank accounts through UPI, and interoperability for PPIs issued in the form of cards through card networks.

The RBI issued consolidated guidelines for enabling all phases "in order to prepare better for implementation of interoperability".

Interoperability is the technical compatibility that enables a payment system to be used in conjunction with other payment systems.

Interoperability allows PPI issuers, system providers and system participants in different systems to undertake, clear and settle payment transactions across systems without participating in multiple systems.

MobiKwik, Oxigen, Paytm, ItzCash, and Ola Money are some of the popular mobile wallets in the country.

--With inputs from PTI



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Updated Date: Jan 29, 2019 12:41:59 IST

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