Aadhaar order: Financial sector companies in a fix
Some firms have temporarily stopped eKYC as they await further instructions from UIDAI and respective regulators
Aday after a five-judge Supreme Court bench banned private parties from using Aadhaar, financial sector companies are busy allaying customers’ fears, and some have stopped eKYC as they await further instructions from the Unique Identification Authority of India (UIDAI).
Says Gaurav Gupta- Co-founder and CEO, MyLoanCare: “People should be aware of the court’s observation that there is no possibility or risk of someone creating a profile of a customer by simply being in possession of one’s Aadhaar number.”
Importantly, products like two-minute loans are likely to take a hiatus till the government provides some legislative backing to the private sector, or companies change their business models to adapt to the new reality. “The major hit will be seen in services like instant account opening where an instant verification based on the Aadhaar data helped in doing away with other unnecessary paperwork. Now companies will go back to demanding other relevant documents from customers for verification,” says Devendra Rane, founder & CTO, Coverfox. Experts believe, a large chunk of tech-savvy people were getting attracted to these fast-paced services, and with the verification process slowing down, they will be adversely impacted.
Bala Parthasarathy, Co-Founder & CEO, MoneyTap says, “This is like a toll booth. Service providers can encourage people to use Aadhaar if they want to take the fast lane, but if they don’t have Aadhaar or if don’t want to use it, they can still take the slow lane. So basically, we give consumers a choice instead of denying services.”
A major change due to the SC decision will be the rise in costs for consumers. The CEO of a general insurance company, who wished to not be named, says, “While we await instructions from the Insurance Regulatory and Development Authority of India, the immediate impact will be that the cost of customer acquisition will increase, and our turnaround time for selling products and settling claims will also rise. There are different technologies to authenticate and verify customer details but the Aadhaar e-KYC system was very efficient. If we have to
move back to a paper-based system, our costs will increase and the quality of service, especially speed of service, will be impacted.”
A Mumbai-based mutual fund advisor said that more clarity on the ruling is needed. “Aadhaar was anyway an optional requirement by mutual funds. Few mobile apps, which were using Aadhaar-based eKYC, may get impacted from this ruling. However, we are still not sure whether the ruling means that private entities are mandatorily barred from accessing Aadhaar data or the ruling just means that investors aren’t obliged to share Aadhaar data,” he said.
In the past few years, a large number of companies have spawned whose business models are completely reliant on the 12-digit number for eKYC. Even banks and insurers have taken the Aadhaar route to simplify loan sanction or sell an insurance product. These companies fear that the SC decision will put paid to all the efforts made to create an ecosystem around Aadhaar.
“At least 20 per cent of first-time investors used the eKYC route on our platform. Aadhaar-based eKYC made it simpler to on board first-time investors,” said Harsh Jain, co-founder and CEO of Bengaluru-based online investment platform, Groww.