There is some relief for users who rely on mobile wallet apps to make payments. The Know Your Customer (KYC) compliance deadline for mobile wallets has been extended till the end of February next year, by the Reserve Bank of India (RBI). This means mobile wallet companies including Paytm, Amazon Pay, Airtel Payments Bank and PhonePe has till February 29, 2020 to complete the physical and complete KYC process for all active users. According to the Reserve Bank of India (RBI) guidelines that became applicable in March this year, every mobile wallet, except the ones that solely rely on the Unified Payment Interface (UPI) for transactions, need to have complete KYC. What does this mean?
As of now, nothing changes for you, as a mobile wallet app user. You can continue to use your Paytm or Amazon Pay or PhonePe wallets to make payments. And this new RBI notification means you have till February 29, 2020 to reach out to your mobile wallet company and get the physical KYC done. Not doing the KYC again would mean the functionality of the wallet will be restricted or completely disabled. “It is advised that the timeline for conversion of minimum detail PPIs to KYC compliant PPIs has been extended from 18 months to 24 months. The PPI-MD has been amended suitably. It may also be noted that no further extension will be granted for this purpose,” says the RBI in its Amendment to Master Direction on Issuance and Operation of Prepaid Payment Instruments (PPIs) notification.
A lot of smartphone users, over the past few years, have started using mobile wallets as the default payment mode for multiple purchases, as the Narendra Modi government put emphasis on reducing cash transactions.
The wallets are now formally called prepaid payment instruments (PPIs), as per the current set of guidelines. Over the past year and a bit more, e-wallets and digital wallets such as Paytm, Amazon Pay, Airtel Money, Freecharge, and Mobikwik had utilized the option of partial KYC, which meant users could upload an identity document as proof and confirming that with a one-time password (OTP) authentication using the registered mobile number. Such was the push for Aadhaar at one stage that every digital wallet company (as did mobile companies and pretty much everyone else, for that matter) used that for authentication and verification. But the RBI guidelines state that the eKYC or partial KYC is valid for a period of one year. Post that, mobile wallet companies are required to re-do the KYC for its users, in person.
This means physical verification of the person’s documents. Now that can be a painstaking process. Just Paytm has more than 350 million registered users in India, as of June. “Wallet services provided by Paytm Payments Bank are governed under the RBI guidelines of pre-paid instruments. These guidelines require that for issuing Wallet to customer Minimum KYC must be completed. Further, Minimum KYC is valid for 18 months. For using Wallet beyond 18 months as well as for availing complete benefits of Wallet, Full KYC needs to be completed,” says Paytm.
Once the eKYC or partial KYC or minimum KYC validity expires, you may be left with a wallet app that either restricts use or blocks you out completely, depending on specific policies. “After expiry, you will not be able to add money to your wallet or transfer the balance amount to your bank account. You can however continue to use your existing wallet balance for making payments at 12 Million+ merchant outlets as well as online payments on apps/websites accepting Paytm,” says Paytm’s policy on the matter. Users will also be able to use Paytm for UPI transactions in such a scenario. If you are an Amazon Pay user, the policy states that you won’t be able to add money to the Pay wallet till the full KYC process is completed.
Most wallets also take the pains to clarify that they are no longer accepting Aadhaar card as a valid KYC document, and instead are willing to accept other identity documents including a voter ID card, passport and driving license.
Freecharge, another digital wallet said in a notification earlier this year, “Full KYC involves submission of a valid Proof of Identity & Proof of Address with in-person verification.” The company goes on to clarify that “If you do not complete Full KYC, you will not be able to Add Money in Freecharge Wallet or withdraw money from Freecharge Wallet. However, you can use an existing Wallet Balance for Merchant transactions.”
Two separate developments meant the new regulations had to be put in place for the re-KYC of all users. First, in September last year, a five-member Constitution bench headed by former chief justice Dipak Misra ruled that it was “unconstitutional” for private firms to seek Aadhaar-based authentication. After the Supreme Court verdict, only the government can use Aadhaar for social welfare schemes. At the same time, RBI released the new guidelines that mandated full KYC for all customers. Digital wallet companies now cannot use Aadhaar data anymore, which meant every single customer that has already been verified needs to be re-verified. The emphasis is on offline verification, meaning physical verification of identity documents which are then attached to a user’s ID on the platform.
These specific guidelines for complete KYC , though now with an extended deadline, come as part of the larger group of new rules which the RBI has mandated mobile wallets have to follow—this includes how every SMS being sent out to notify a transaction to a user must have a contact number to immediately report fraudulent transactions, all mobile wallet companies must have a round the clock helpline number to report fraudulent or any other issues with transactions done from their account and that the mobile wallet companies are now liable to refund the entire amount of a fraudulent or incorrect transaction within three days of the transaction being reported.