As the world becomes technology driven at a rapid pace, more and more business dealings are being conducted over the virtual media. The online platforms not only provide door-step delivery of goods or services but also allow the cashless operations to be completed in the physical world. This saves a lot of haggling involved in counting and carrying cash and potential threat of theft or extortion. With the onset of digitalization, there has been a drastic shift from the age-old exchange of currency for purchase to the direct safe transfer of the payments.
In order to facilitate the payment transaction on the electronic medium, mobile wallets have been designed to serve as platform to carry cash in digital format. One can link his/ her credit card or debit card information on their mobile device to mobile wallet application or they can transfer money online to mobile wallet. Instead of using physical cash or plastic card to make purchases, one can pay with his/ her mobile phone, tablet, or smart watch. An individual’s account is required to be linked to the digital wallet to load money in it. Most banks have their e-wallets and some private companies such as Paytm, Freecharge, Mobikwik, Airtel Money, Jio Money, SBI Buddy, Vodafone M-Pesa, etc.
As per the Master Direction – Know Your Customer (hereinafter referred to as “KYC”) Direction, dated July 12, 2018, issued by the Reserve Bank of India (hereinafter referred to as the “RBI”) regulated entities such as banks, Indian Financial Institutions, Non-Banking Finance Companies, Payment System Providers, etc. are required to ensure that appropriate KYC procedures issued from time to time are duly applied before introducing new products/services/technologies.
E-KYC authentication facility is the authentication facility which includes the biometric information and/or One Time Pin and Aadhaar number securely submitted with the consent of the Aadhaar number holder through a requesting entity, is matched against the data available in the Central Identities Data Repository.
RBI is closely monitoring monthly status reports by mobile wallet companies on how many of their customers have completed authentication, or KYC, formalities as directed by it. This is being done in furtherance to the approach of creating a transparent mechanism of dealing business transactions. The Government has been time and again emphasizing the requirement of proper client identification to mitigate the risk of illegal activities. The mobile wallet companies on the other hand face the challenges such as lack of physical infrastructure to collect biometric details.
Although, the introduction of stricter obligations is to be followed by the mobile wallet and regular supervision by RBI operators increases the compliance burdens, it aims to minimize the unlawful activities by notorious miscreants who intend to mis-utilize the electronic systems to their advantage.