The Supreme Court verdict on the use of Aadhaar-based authentication by private enterprises has affected several sectors' KYC processes.

To understand the scale of the impact, we'll look at data that show how RBI regulated enterprises have been making use of the eKYC facility.

The data for this analysis has been taken from the dashboard on the UIDAI portal.

Private Indian Banks

The chart below shows the total eKYC transactions completed by entities classified as private Indian banks by the RBI. Only banks that are registered as KUAs and have completed at least one million eKYC transactions are shown here.

The eleven banks that make the cut have completed a combined total of a little more than 85 million transactions.

To put that number into perspective, 85 million authentications would have been enough to verify the identities of the entire population of all but 15 countries in the world.

The top three private banks have completed approximately 60 million eKYC transactions. Even if a small fraction of those transactions were OTP based eKYC authentication, the resultant saving for the top three companies could easily amount to a few million dollars.

Eight banks have undertaken between a million to six million transactions with a combined total of approximately 25 million transactions.

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Non-Banking Financial Companies (NBFCs)

NBFCs come in all shapes and sizes offering different types of services, so it is hardly a surprise that we see a huge range in terms of the number of eKYC authentication that different NBFCs have undertaken.

The table below shows NBFCs registered as KUAs with more than a million eKYC transactions completed.

Bharat Financial Inclusion Limited (formerly known as SKS Microfinance Limited) or BFIL has conducted almost three times more eKYC transactions than Home Credit India Finance Limited (HCIFL).

The adoption of eKYC by a small finance company focused on rural areas at such a scale may indicate the utility of Aadhaar eKYC in rural areas for businesses, which could make for an interesting study in itself.

The other interesting point worth noting here is that the list of KUAs represents a range of loan providers - housing finance, asset finance, SME and individuals,  small finance and even gold finance.

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Payment Banks

Payment banks represent one of the sectors that have shown the greatest promise in terms of user acceptance but also one which has been plagued by uncertainty because of regulator decisions.

Airtel Payments Bank was stopped from adding customers for a few months for opening bank accounts of its telecom users without consent.

More recently, both PayTM and Fino Payments Bank were reportedly stopped by RBI from adding new customers.

In spite of the hiccups, it is clear that all organizations in this space are looking for aggressive growth and efficiency in KYC processes is going to be one of the critical factors in their success.

In fact, PayTM is said to have budgeted a sum of Rs. 3500 crores towards KYC for its customers over the next three years.

While Airtel and PayTM are currently miles ahead of the other payment banks in terms of eKYC transactions completed, it will be interesting to observe the new entrant India Post Payments Bank, which has completed over 2.5 million eKYC transactions within the first twenty days of launch.

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Prepaid Payment Instruments

Like payment banks, businesses providing pre-paid instruments are also experiencing exciting yet uncertain times.

The chart above lists all pre-paid instrument providers who have completed more than a 100,000 eKYC transactions.

Some of these like Idea Money, Jio Money and Fino PayTech have converted to payment banks. Jio Money and Fino PayTech continue to perform some eKYC transactions as KUAs at the time of writing.

Among the other wallet providers, Transaction Analysts Wallet was observed to have not undertaken an eKYC transactions in recent times.

Pre-paid payment instrument providers have seen their KUA status revoked suddenly or prevented from completing full KYC because of being classified as local AUAs.

While on the one hand pre-paid instrument providers have perhaps the greatest need of being able to onboard customers at the lowest cost possible, they seem to be facing the most amount of hurdles in getting there.

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This is best illustrated by the fact that the leading pre-paid instrument registered as a KUA has completed less than 10 million transactions at the time of writing.

Conclusion

This chart shows the KUA that has performed the maximum number of eKYC transactions for the different types of regulated entities we have looked at.

The two sectors that bring up the sides - prepaid instruments and payment banks are the relatively newer entrants on the block with each facing their own set of challenges when it comes to adopting Aadhaar eKYC.

Some payment banks have the advantages of existing nationwide infrastructure and access to capital that makes the KYC problem a less crippling one to have.

However, for pre-paid instrument providers, NBFCs or even payment banks who do not have scale like Airtel or India Post, any solution that increases the burden of KYC could have catastrophic results.

It is thus imperative for RBI and UIDAI to frame policy as well as back it with the required technology to help these businesses implement presence-less KYC and onboarding.

Businesses have a major incentive to ensure that the regulators don’t find reasons to stop them from making use of such a facility, which is why the regulators need to work together with the industry in the framing of policy and reviewing its implementation.

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