KYC deadline ends: Mobile wallets likely to lose 40% of their user base

After spending close to a billion dollars to acquire more than 500 million customers, mobile wallet firms fear losing almost 40 per cent of its user base, with the deadline for know your customer (KYC) registration ending on Wednesday.

According to industry watchers, mobile wallet firms, including Paytm, Amazon Pay, PhonePe and MobiKwik, fear losing a chunk of their user base. Some like Amazon Pay have seen a 30 per cent drop in customers, with most members not updating their KYC details, they added.

Prepaid Payment Instruments (PPI) aim to digitise low-value, low-risk and high frequency transactions. 

“Customers see KYC as a point of friction and need to be motivated for doing digital transactions. The industry is working towards being compliant with the RBI master directions for PPIs, but the customer adoption of KYC norms has not been very encouraging,” said Sunil Kulkarni, co-chairman of the PPI committee of the Payments Council of India (PCI).

Compliance requirement for issuers are deterring customers from transacting through PPIs, he added. 

The industry is providing cash backs to users to incentivise them to use digital means for transactions.

“In the short term, this is needed to bring customers on board and convert cash behaviour into digital in the mid-to-long term. In terms of a sustainable strategy to drive KYC, what will enable customers to do so is a smooth digital KYC experience,” said Sriram Jagannathan, co-chairman of the PPI committee. 
 

Companies, including Paytm and MobiKwik, refused to comment. 

“Based on early results, most players have seen a big drop in customer base. We have seen a significant drop in new customer registrations and expect further drop offs in the coming days as we make OVD collection mandatory for cash loading at doorstep. Customers opt for cash since they cannot load money without furnishing additional details,” Kulkarni said.

Mobile wallet firms are investing heavily to get KYC done. Companies such as Paytm have demarcated almost $500 million to get the KYC process done for its 280 million-plus customers.

“The Reserve Bank of India’s (RBI) revised master circular directing wallet companies to make all PPIs issued by them full KYC compliant are cumbersome,” said Vinay Kalantri, founder and managing director of The Mobile Wallet. It will shrink the space for wallet providers further since only 45 per cent of customers have completed the full KYC compliance process so far. 

Therefore, migrating to full KYC norms will mean wallet companies losing customers faster since those who are not fully KYC compliant will stop using PPI instruments.