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Banks, fintech companies stare at higher KYC costs after Aadhaar verdict

27 September, 2018 5:53 AM
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Banks, fintech companies stare at higher KYC costs after Aadhaar verdict

Banks and fintech companies expect that onboarding new customers will get tougher with the Supreme Court barring private companies from mandating Aadhaar for e-KYC compliance.

Several fintech companies have, by the dint of the erstwhile Section 57 of the Aadhaar Act, acquired customers through e-KYC with just biometric identification. Such companies had used the Aadhaar to verify customers’ details for minimal cost and virtually no time, both of which will go up after SC’s judgment.

Most of the conventional financial firms and fintech companies, including discount brokerage firms, peer-to-peer lending platforms and financial product aggregators, had built their business models around this. Digital accounts of public sector banks like State Bank of India and India Post Payments Bank and digital wallets like Paytm were also based on Aadhaar.

Now that this provision has been removed, the cost of getting new customers on board will shoot up significantly. A lot of discount brokerage firms, peer-to-peer lending platforms and financial product aggregators depend on Aadhaar-based KYC verification and e-signatures.

The cost of e-KYC was Rs 15. Physical KYC will jump to Rs 100 per person, according to Harshil Mathur, CEO of payments firm Razorpay.

SBI chairman Rajnish Kumar said that using Aadhaar, a customer can open an account instantly and this convenience had drawn in nearly 27,000 customers to the SBI internet banking app. Similarly, Kotak Mahindra Bank’s Kotak 811 scheme is based on RBI’s Aadhaar-based OTP authentication guideline. It was a convenient, paperless and quick process.

However, Virat Diwanji of Kotak Mahindra told The Times of India that there may not be adverse effects on the number of accounts opened as Aadhaar is still available as a KYC option, even if it is not mandatory.

Source: moneycontrol.com

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