Aadhaar based eKYC authentication offers many benefits for businesses over other forms of KYC authentication. Like, faster customer onboarding, freedom from manual data entry errors in onboarding forms, fewer application rejections and significantly lower cost per KYC conducted.
Probably the most useful to the industry, especially the financial services industry, has been the facility of OTP based eKYC authentication. This allows businesses to start relationships with new customers without having to necessarily meet them in person.
However, the RBI norms impose heavy restrictions on accounts opened in the non-face-to-face mode, which means that many consumers can’t get access to unrestricted banking facilities or credit, if they are unable to go to the financial institution in person, or a representative from that company visits them.
The industry has strongly voiced their disapproval with the limits placed on such accounts and have received support from key policy makers in the government as well.
On the other hand, UIDAI which is the body responsible for managing access to the Aadhaar database has also created problems and confusion by suddenly preventing many firms from performing authentications or failing to implement solutions that address concerns about data security and privacy.
This has led to some companies looking at other modes of authentication, even though from a business point of view, the Aadhaar eKYC facility would make the most sense for them.
To understand the scale at which eKYC authentication is taking place in the country, we will look at some charts that show how RBI regulated enterprises of different types are making use of the facility.
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Note on data and interpretation
The data for this analysis has been taken from the dashboard on the UIDAI portal.
The data provided by the dashboard summarises the total authentications completed by the KUAs (eKYC User Agency or companies authorised to send eKYC requests to UIDAI) at the time of generating the report. The cumulative figure may include transactions undertaken on behalf of other companies (or sub-KUAs).
It should be noted that the figures of eKYC shown should not be taken as an indication of total customers acquired by the company in absolute terms or relative to other companies.
To summarise, the trends shown here are only indicative of the number of eKYC transactions being done and should not be used to interpret any other business trends.
Private Indian Banks
The chart above 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.
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 above 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).
As stated earlier, these numbers should not be used to draw conclusions about other aspects of business.
However, 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.
Read: What the industry needs from the RBI norms related to Aadhaar, KYC, and eKYC Click here
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.
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.
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.
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.
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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