Fintech companies brace for increase in expenses after Supreme Court’s Aadhaar verdict
The Supreme Court’s order that private entities cannot avail Aadhaar data, is expected to hit the fintech industry, which rides on electronic know-your-customer (e-KYC) for onboarding customers, because the expense of completing the verification needs are sure to skyrocket.
The Supreme Court’s order that private entities cannot avail Aadhaar data, is expected to hit the fintech industry, which rides on electronic know-your-customer (e-KYC) for onboarding customers, because the expense of completing the verification needs are sure to skyrocket, say executives of fintech firms.
E-KYC allows fintech companies to onboard customers to offer financial services such as mutual funds and e-wallets through Aadhaar and a one-time password (OTP)-based KYC.
“The SC has tried hard to untangle the Aadhaar knot and has provided a reasonably balanced verdict. What is yet to be clear is what about the optional use of Aadhaar in private sphere for doing voluntary identify establishment through the e-KYC mechanism. We are awaiting interpretation of the rulings in this regard. It is important part in the ecosystem,” said Srikanth Meenakshi, co-founder of FundsIndia.com, a mutual fund fintech firm.
The alternative to e-KYC is the verification of physical documents, which is neither convenient nor cost-effective. “E-KYC provides convenience over an offline process. The power is now left to the consumers to provide Aadhaar to private entities. Using physical documents is not practical. E-KYC with OTP is fully secure,” said Adhil Shetty, founder of online financial marketplace Bankbazaar.com.