"Minimizing Know Your Customer (KYC) requirements to maintain clientele in the digital wallet sector"
The Reserve Bank of India (RBI) has introduced a significant relief for mobile wallet users who were previously non-compliant with Know Your Customer (KYC) requirements. In 2021, the central bank introduced the 'low KYC' exception for non-KYC certified mobile wallet users.
This move comes as digital payment companies have been appealing to the government and the RBI to ease KYC guidelines due to struggles with customer database management and costs. The companies have reportedly spent over Rs. 2000 crores for KYC compliance.
The 'low KYC' accounts, which allow monthly transactions of Rs. 10,000, are a form of relief for these users. Users who are not fully KYC compliant can continue operating on these platforms by converting their accounts to 'low KYC' Pre-Paid Instruments (PPIs).
The Supreme Court ruled out using Aadhar as an authentication means for KYC in 2018, adding to the challenges faced by digital payment companies. To reduce costs and increase KYC compliance, these companies have introduced digital KYC and video KYC.
Despite an increase in digital payments and transactions, the wallet share has reduced. This could be due to the increasing prevalence of Unified Payments Interface (UPI) applications throughout the country, which have been pushing for mobile wallets.
The deadline for full KYC compliance was initially set for mobile wallet companies, but fintech companies like PhonePe, Paytm, and Amazon Pay have been given a deadline to ensure full KYC compliance for their users by February 29.
This decision benefits 200 million non-compliant KYC mobile wallet users. However, it's important to note that 'low KYC' accounts are still subject to certain transaction limits.
The introduction of the 'low KYC' exemption is a step towards making digital payments more accessible and affordable for a larger population in India. As the country continues to digitise its economy, it's likely that we'll see more such initiatives aimed at making digital transactions easier and more inclusive.
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