Virtual IDs turn a problem for NBFCs
MUMBAI: The Unique Identification Authority of India (UIDAI)’s plan to make non-banking financial companies (NBFCs) use Aadhaar Virtual IDs (VIDs) to authenticate customers from July 1 has put these companies in a fix.
The government introduced 16-digit VIDs in a bid to address privacy concerns around sharing Aadhaar numbers at the time of authentication. While agreeing that protecting privacy is a good move, NBFCs point out that using VIDs will give them access to limited details about the customers, which may make lending more difficult.
Earlier, the Aadhaar data of all customers were synced with credit bureaus, which allowed NBFCs to do eKYC without the need for physical verification, said a digital strategy officer of a top NBFC. He did not wish to be named, given the sensitivity of the issue. Since VIDs mask the Aadhaar number, NBFCs believe the cost of customer acquisition will rise as they have to do additional physical checks.
NBFCs also point out that many customers are not fully aware of VIDs as UIDAI is yet to publicise this new system. These firms, the above-cited executive said, are concerned that “it would be left to them to push customers to register for VIDs”, increasing the cost of customer acquisition.
NBFCs are also miffed with a May 16 circular, wherein UIDAI has classified entities as global AUAs (authentication user
agencies) and local AUAs, depending on their access to Aadhaar data for customer verification. Banks and life insurers have been categorised as global AUAs and permitted to use Aadhaar numbers to do eKYC verification. On the other hand, NBFCs, home financiers, prepaid instrument issuers and telecom companies have been classified as local AUAs and must use VID to perform a one-time password -based customer authentication.
NBFCs and other industry bodies, including the Payment Council of India, have raised these issues with UIDAI and sought more time for this transition. “While we understand the concerns around Aadhaar, the UIDAI’s differentiation of global AUAs and local AUAs is not understood,” said Naveen Surya, chairman, Payment Council of India.
UIDAI CEO Ajay Bhushan Pandey did not respond to phone calls seeking comment.