Authentication hurdle for private fintech players
Private companies have over the past few weeks found patchy Aadhaar authentication services a major hurdle for their business. Some have even alleged that the service had completely shut down.
For the payments and telecom industries, introduction of Aadhaar-based Know Your Customer (KYC) was a big opportunity. With only people’s thumbprints, companies have managed to enrol tens of millions of users for services ranging from banking and mobile connection to digital lending.
The Reserve Bank of India (RBI) has made KYCs a requirement for fintech firms. For instance, mobile wallets such as Paytm and MobiKwik require full KYC to allow their customers to use their services.
However, of late, things have been somewhat bumpy.
On Wednesday, Jitendra Gupta, founder of CitrusPay, took to Twitter to complain about how services had stopped for all authentication user agencies (AUAs). “Suddenly, all fintech businesses banking on Aadhaar are left scrambling!” he tweeted.
AUAs and their sub entities are companies with a direct connection to the Unique Identification Authority of India (UIDAI) servers and can authenticate Aadhaar numbers in a simple “Yes/No” format. Some AUAs such as Khosla Labs allow clients such as payments and fin-tech companies to integrate Aadhaar into their systems for faster transactions.
Gupta said companies have been facing issues with authentication over at least the past two days. “All e-KYCs and authentication has been stopped for private companies by the UIDAI. This is apparently because the case is subjudice in the Supreme Court. This has created chaos in the industry,” he added.
Gupta also said the problem iss likely to persist till the case in the Supreme Court had been resolved. “They have given nothing in writing. There is no clarity on when services would be resumed,” he added.
The UIDAI did not respond to queries over email or phone. Senior fintech industry executives, however, confirmed issues with authentication.
“They (the UIDAI) do not want to allow many companies access to these services anymore because there are risks of data leak. Any company can start gathering Aadhaar information, which is not good for a sub-judice case,” a source said.
According to the data on the UIDAI website, the number of e-KYCs being registered per day came down from 12.8 million earlier in the year to only 515 on March 24, two on March 28 and three on April 1. Firms have claimed there was complete outage of services on April 3, but no data is available on that yet.
The number of authentications has also fallen dramatically from an average of 37.5 million per day earlier in the year to 15,000 on March 30.
Some operators, however, do not seem to be facing this problem.
For instance, payments wallet MobiKwik said e-KYC was working fine for them. Their consumers though were confused since the recent Supreme Court staying the linking of Aadhaar number with nonessential services.
“A lot of users are hesitant about sharing their Aadhaar or biometric details. Our teams have been working overtime to educate users about the importance of KYC,” said Upasana Taku, cofounder of MobiKwik.
Even as they look for alternatives to Aadhaar authentication, fintech companies expect clarity from the government, said Naveen Surya, chairman, Payment Council of India.
“Aadhaar authentication and e-KYC is beneficial for fintech, but changing policies and practices are causing unnecessary disruption,” Surya said.