RBI implements stricter KYC norms for E-wallet security

By Shweta Arya

KYC policies are critical for protecting the safety of banks and the integrity of banking system in the country. Know your customer (KYC) is the process of a business, identifying and verifying the identity of its clients.

The Reserve Bank of India has allowed "interoperability", i.e.,the ability of computer systems or software to exchange and make use of information and introduced stricter Know Your Customer (KYC) norms to prevent fraud, enhance competition and encourage innovation, for all e-wallets.

Products achieve interoperability with other products using either or both of two approaches:

• By adhering to published Interface standards.
• By making use of a "broker" of services that can convert one product's interface into another product's interface without any interruptions.

For the customers, the whole process brings ease as one can now move money between wallets of different companies and banks seamlessly through Unified Payments Interface (UPI) provided they complete full KYC formalities, like they do for bank accounts. Non-verified wallets cannot have a balance of more than ₹10,000, and this amount can only be used for the purchase of goods and services and not for transfer to other wallets or bank accounts. However, full KYC wallets will have a limit of ₹1 lakh and the option to transfer to other wallets will be available.

For the industry, currently using minimum KYC norms, such as a simple mobile number verification, complying with the RBI's proposed KYC requirements could cost around ₹120 – ₹200 per customer, depending on the location and the documents. For a company like MobiKwik, that has about 65 million users, a cost of around ₹7801,300 crore is forecasted. Even for digital wallet companies with fewer customers, the costs would be significant. Another worrying factor is that the zero balance accounts of customers of all such wallets would have to be closed, affecting the user base of the payment apps.

All the existing wallet users should convert to the full KYC format by this year end. The RBI has set the compliance deadline as December 31, 2017, for the new set of rules. To cut down the costs, the most likely method to perform the large-scale KYC process is touted to be Aadhar-based through mobile number identification. The step by the Reserve Bank of India (RBI)  is aimed to define a more safer and monitored path for e-wallets in the more digitally equipped future of Indian bank payments.