Increasing prevalence of the Unified Payment Interface (UPI) applications have seen to be the new backbone of the way India prefers to pay these days, with a massive push for mobile wallets.
We have covered a plethora of articles showcasing the rate at which UPI has been leading the Indian markets. Due to their ease in interfacing for customers and at the same time there being an intense battle amongst PhonePe and Google Pay, the UPI ecosystem is immensely expanding.
Speaking of which, RBI has taken a step forward achieving an easier regulatory system for fintech companies, wherein it has agreed to allow non-compliant KYC accounts to continue making payments through mobile wallets.
What Was the Problem Faced by Fintech Cos?
In 2018, the Supreme Court had ruled out telcos and NBFCs from using Aadhar-based KYC method as a tool for authentication. This act led to fintech companies have been writing to RBI to find alternate methods to smoothen the KYC process and cut the cost incurred from physical onboarding and verification of customers.
Physical KYC was very time consuming and the digital payment companies also spent over Rs. 2000 crores for KYC compliance.
Now, in an attempt to ease out regulations for fintech companies like PhonePe, Paytm and Amazon Pay, the cerntal regulatory body, RBI has agreed to allow non-compliant KYC accounts to continue making payments through mobile wallets, which it had earlier put a transaction limit on.
What are ‘Low KYC’ PPI Accounts?
RBI is expected to permit transactions by giving customers the option to convert their ‘minimum KYC’ accounts to its newly introduced ‘low KYC’ PPI (Paid Payments Instruments) accounts. This shall provide a leeway for users that aren’t fully KYC compliant to still continue operating.
This decision by RBI came after it had urged the mobile wallet companies to comply with full KYC compliance by the deadline of February 29.
This account shall permit monthly transactions of Rs. 10,000, which comes as a relief to 200 million non-complaint KYC mobile wallet users.
According to Paytm CEO, the customer’s consent will be taken before the ‘low KYC’ conversion of the accounts happen and the company shall soon announce the details of how this conversion will happen.
RBI Introduces ‘Video Based’ KYC
Over the years, fintech companies have been writing to RBI to find alternate solutions to smoothen the KYC process, as huge costs were incurred from physical onboarding and verification of customers.
To reduce costs and get customers KYC complied, the RBI came up with video KYC as an option to establish customers’ identity. Through this, the regulatory entities will be able to record video as well as capture photographs and obtain details of the customers.
Most importantly, this procedure will eliminate physical onboarding and verification process of customers. RBI has also advised regulatory entities to ensure the video recordings are stored in a secured manner.
Along with this, RBI is encouraging fintech companies to leverage emerging technologies, including artificial intelligence and face matching and recognition technologies to ensure the integrity of the process.