New rule may change India's payments scene

BENGALURU: Digital finance companies could be allowed to verify customer antecedents through the Aadhaar database, according to a note that envisages grant of the electronic KYC facility to non-banking firms.It will be a significant gain for mobile wallets, digital lending startups and others struggling to comply with customer verification banking guidelines.The note, circulated by the Department of Revenue in the finance ministry, indicates that if non-banking companies — bound by the Prevention of Money Laundering Act, 2002 — follow Aadhaar’s privacy and security standards, the government will consider providing them access to the biometric-based database.“Any reporting entity that desires to carry out authentication of the client’s Aadhaar number using eKYC needs to be notified under these provisions,” said the note, sent on May 9 to all financial regulators, including Governor of the Reserve Bank of India (RBI) and chairman of the Securities and Exchange Board of India (Sebi). ET has reviewed a copy of the note. “The regulator and UIDAI should be satisfied of the credentials of the entity,” it said.The note lays out a three-step process that ‘reporting entities’ — wallets, non-banking finance companies and stockbrokers — need to follow to access the Aadhaar database.For instance, payment and lending companies must first seek permission from RBI, while broking entities will need Sebi sanction, before they can query the database.Once the regulator grants permission, these entities have to apply to the Unique Identification Authority of India (UIDAI), which manages Aadhaar, for a privacy and security examination. The request for information will then be sent to the finance ministry for clearance.“While it requires a three step process, at least now (we) will get access to the Aadhaar database (and) be able to do KYC remotely,” said Adhil Shetty, chief executive, Bankbazaar, an online marketplace for credit cards and personal loans. 69366448 Banks and telcos have been allowed to access Aadhaar data of customers who share it voluntarily through an ordinance passed in February. But other entities like mobile wallets have remained on tenterhooks, with the central bank further instructing them to capture full details about their customers by end August to keep the accounts operational. Payments Council of India, the industry body representing payments companies, welcomed the proposal to widen access to the Aadhaar database, saying, “It will bring... greater financial innovation and inclusion.”“It will lead to a paperless, cashless and a fair digital economy with the mechanism of substantial audit trail preventing various scrupulous activities,” said a representative for the council. The note also highlights the provision for UIDAI to suspend and cancel access to any entity that defaults.Industry executives said while access to Aadhaar will help, it also throws up new challenges. For multiple players to be able to access this service KYC authentication agencies will require new licences, while biometric authentication will still require physical presence of customers.

from Economic Times http://bit.ly/2VuDC2n