In its third master direction on prepaid payment instruments (PPIs), commonly known as e-wallets, RBI has allowed inter-operability among e-wallets and bank accounts through unified payment interface (UPI), in a phased manner. At the same time, in a worrying move, it has allowed a full 12 months for service-providers, or PPIs, to ensure compliance with full know your customer (KYC) requirements.
This means that anyone can open an e-wallet through a mobile number that is verified with a one-time passcode (OTP) and a self-declaration of name and unique identification number of any officially valid document. Such a user can carry out transactions worth Rs10,000 every month or totalling Rs1 lakh in the next 12 months without being fully compliant with KYC. After 12 months, the user can continue to use her balance in e-wallet but cannot load new money.
We believe that this extended time is not in the interest of customers, given the high incidence of innovative frauds that are duping people. In most cases, people are fooled into parting with their OTP and the money is rapidly transmitted through multiple e-wallets. Most e-wallet accounts can be opened with a mere email ID and mobile number and this will continue for at least 12 months more, making it almost impossible to nab the fraudsters before the money vanishes.
The e-commerce industry, undoubtedly, wants people to be able to open e-wallets with minimum friction and less documentation; but the accounts have to be made fully KYC-compliant within a couple of months to decrease the incidence of digital fraud. In a country with low financial literacy, where people are still grappling with rapidly changing technology, detailed KYC will safeguard lakhs of gullible customers who fall prey to fraudsters by responding to calls in the belief that a genuine bank officer has called to help with Aadhaar linkage to phone-lines, or activate/unblock/prevent blocking of credit or debit card.
Under the new rules, RBI wants PPI issuers to ensure that the same user is not issued multiple e-wallets with minimal KYC requirements. This can be achieved only if all PPI issuers share customer data among themselves or with a central repository. At present, there is no such system in place. This will allow fraudsters to open multiple e-wallets with multiple PPI issuers and continue to cheat people.There can be no midway for KYC norms, especially for financial transactions. Either you are KYC-compliant or not—the regulator must ensure it.