With Aadhaar-based eKYC off the table, firms are finding workarounds

Indian companies are exploring workarounds to meet Know-Your-Customer norms electronically in the wake of last month’s Supreme Court order which prohibited private firms from seeking customers’ Aadhaar details for verification purposes.

Some companies are scanning quick response (QR) codes — used to provide access to information through a smartphone or any other electronic device — inscribed on the card containing the government’s 12-digit identification number or deploying facial recognition technology for eKYC procedures, industry executives say.

For instance, blue-collar workforce management platform Betterplace Safety Solutions Pvt. Ltd has taken the QR code route. For address verification, it uses PAN (Permanent Account Number) card, driving licence and other documents. It then cross-checks this information by scanning the QR code. A customer’s biometrics are not accessed as part of this process.

“Though Aadhaar-based eKYC was only one step in the verification process which takes three days, it was easier. However, business runs as usual,” said Pravin Agarwala, chief executive at Betterplace.

Separately, non-banking financial companies (NBFCs) and banks are experimenting with prototypes of facial recognition technology, said KPMG partner Manish Jain.

The Supreme Court verdict in September had dealt a major blow to companies dependent on Aadhaar-based verification, especially since it served as a low-cost proposition.  

Better Place spent just Rs 10 per person when it used Aadhaar for eKYC. The cost has now gone up to Rs 60 as the process requires a visit to the individual’s home to verify the address.

Digital wallet firms in particular were badly hit as the Reserve Bank of India had mandated comprehensive e-KYC procedures for such businesses. In the aftermath of the ruling, they were forced to revert to the paper-route for verification and on-boarding new customers.

The Economic Times reported on Wednesday that Aadhaar’s nodal body, Unique Identification Authority of India (UIDAI), had written to digital payments companies asking them to stop offering Aadhaar-based services on their platform and present a plan in this regard.

“The process of using paper-based KYC will turn back the clock for firms by a full year,” said Rajan S Mathews, director-general of industry body Cellular Operators Association of India.

Meanwhile, government departments have huddled up for a coordinated response to petitions from affected companies seeking an exemption on the use of Aadhaar for eKYC. Industry analysts say a consensus is likely over the next two to three months.

Separately, UIDAI and the Department of Telecommunications (DoT) issued a joint statement on Thursday in which they denied reports which suggested that 50 crore mobile numbers procured via Aadhaar-based KYC could be disconnected if fresh identification details were not provided. They added that the authorities were working on a new digital process to issue SIM cards that would be complaint with the Supreme Court ruling.