RBI’s KYC rule for online wallets could put businesses at risk

Almost INR 12,000 crore or 80 percent of the total online wallet transaction in the country is at the risk of going back to cash as online wallet players fear losing customers due to the KYC rule of Reserve Bank of India. According to RBI, wallet companies like Mobikwik, Paytm, Amazon Pay, Sodexo and Ola Money will have to meet full KYC norms for their customers before February 28.

Minimum KYC has restrictions where the customer will be unable to send money to other wallets or bank accounts or keep more than INR 10,000 in their wallet. Customers are required to submit their photograph if he or she is not a minor in addition to a copy of an officially valid document containing identity details, photograph and address details. This also comes as a concern for mobile wallets because the customers would prefer to go back to a convenient option of cash than do the documentation.

Prepaid cards and mobile wallets facilitate the purchase of goods and services against the money stored in them. This allows the customers to load money through cash, debit or credit cards and bank accounts. Wallet players are jittery as a large part of the business is driven by customers who have given minimum KYC information.

RBI had asked the wallet players to make sure the payment instruments issued by them were updated to meet the KYC norms by the end of February. RBI had given a period of five months for the same. The ultimate fight of mobile wallets is with cash and the business is not about banking but about commerce. The Payments Council of India has asked the RBI to withdraw the KYC requirement or extend the deadline for the same. RBI has issued PPI licenses to about 65-70 players out of which only 10-12 are active.

As per RBI, for the month of December, 31.98 crore transactions with a total value of INR 14,334 crore were performed through the month in prepaid instruments. Mobile wallet transactions make up for a huge chunk of the total transactions accounting 28.83 crore amounting to INR 12,568 crore. Globally also, norms are flexible for smaller transactions of about INR 40,000-50,000 or USD 500.

Currently, PPIs and e-wallet users have met the minimum KYC obligations. While some have verified their mobile numbers, many others have signed up with their names and official IDs like Aadhaar and PAN. RBI has currently restricted only the loading of the cards or wallets but the users can use the existing money in the wallet. In the future, money will only be loaded in the card if the user has provided with the full KYC documentation.