The volumes of remittances and e-commerce transactions made using prepaid payment instruments (PPIs), including electronic wallets, have slumped sharply following the expiry of the February 28 deadline for ensuring all PPI accounts are in compliance with know your customer (KYC) norms, payments industry officials said.
According to industry estimates, the volume of remittances has shrunk 70%, while e-commerce transactions have halved since March 1. The Reserve Bank of India (RBI) had directed PPI issuers to ensure all accounts were KYC compliant “on or before February 28, 2018” and asserted last month that it would provide no further extension.
“Remittance is badly hit due to the KYC norms as compared to e-commerce,” said a payments industry official, who did not wish to be named.
e-KYC saving grace
“E-commerce volumes are hit to a lesser extent because RBI has allowed e-KYC of the customers for 12 months, after which full KYC can be done. However, customers who opt for e-KYC can transact only ₹10,000 per month,” the official said.
While remittances — where account holders transferred funds from an e-wallet to a bank account or to another wallet — had earlier averaged about ₹10,000 crore a month, e-commence transactions, which entailed the use of wallets to pay merchants, had been in the range of ₹2,000 crore a month.
Transactions using e-wallets had fallen a precipitous 80% since February 28, according to e-wallet provider Payworld.
“We were doing 50,000 money remittance transactions per day, which has come down to 10,000 since March 1,” Praveen Dhabhai, COO of Payworld said. “And that is generally what the industry is facing, an 80% fall in the number of transactions since the e-KYC deadline.”
E-wallet providers PayTM and PhonePe declined to comment when contacted by The Hindu .
Migrant labourers
“We have a digital wallet license from the RBI and our target market is the domestic migrant labourers or people like taxi drivers, or the people who are not tech savvy enough to do the transactions themselves,” Mr. Dhabhai explained. “So, for that, we have a retailer base across India. The customer would come to the retailer who would assist them to send the money from their e-wallets to their near and dear one’s bank account.”
However, these retailers had been facing problems since March 1 due to poor infrastructure or poor knowledge, he said.
Infrastructure woes
“Many of our retail points don’t have the required infrastructure to do the e-KYC,” Mr. Dhabhai said. “To do it, you need a biometric device, which is not easy to install. And even if they have the devices, they have to be trained in how to do the e-KYC. We have started doing that training, and have increased the number of call centre executives and the number of operatives on the ground.”
For an e-KYC, it is enough to furnish any one of the four officially valid documents — passport, voter identity card, driving licence, or NREGA job card — in case the account holder does not have an Aadhaar number. For full KYC, complete authentication and verification of residence and identity proof are required. In October, RBI had directed all PPI issuers to make all accounts fully KYC compliant by December 31. The deadline was later extended to February 28.
RBI had issued licences to 55 non-bank mobile wallets while 50 banks have their own wallets.
“It’s an interesting and challenging time,” said Naveen Surya, chairman, Payments Council of India.
“Challenging because it is to be seen how the PPI players come out from the KYC issues that they are facing and retain the customers. Interesting because RBI is talking about complete interoperability soon. If that happens then the customers will have more choices. So the key is how well it is managed till the time interoperability comes in,” Mr. Surya added.
The banking regulator is expected to issue guidelines on interoperability shortly. In the first phase, wallets will be made interoperable, in the second stage it will be between wallets and bank account, and in the final stage, wallets and cards will be made interoperable.
Mr. Dhabhai said that implementing e-KYC was good, but first the required infrastructure needed to be put in place, especially since many of the e-wallet companies were small and struggled to do it themselves.
“Banks and mobile companies, with the ample resources they have at their disposal, are struggling to link customers’ Aadhaar for so many days and banks keep on getting the deadline extensions,” he said. “They have not been able to link more than 30-40% of their customers’ Aadhaars with such large resources at their disposal, how does the RBI think that e-wallet companies will be able to do it?”
Another issue Mr. Dhabhai raised about the e-KYC deadline was that it fell very close to Holi, a time when e-wallet remittances usually surge, something that would have been affected across the industry due to the deadline.
“This is going to be really disheartening because the deadline of the submission of KYC came during Holi, a time when remittances are the highest,” he said. “A large percentage of the wallet users for remittances is people with blue-collared jobs, taxi drivers and daily wage labourers, among others.”
