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Fintech companies, which offer a range of services like instant paperless loans, mutual fund investment options and digital payments, are now writing to the ministry of electronics and information technology (MeitY) requesting inclusion of all regulated entities in the amendment that will be placed before Parliament.
“If the amendment is brought only for banks then the broader fintech industry will suffer and the problem will not be solved, hence the industry is set to reach out to the ministry requesting to bring all regulated entities within the amendment’s purview,” said a senior executive at a payments company.
These companies are hoping for the restoration of Aadhaar-based verification for their customers, a service they had to curtail after the Supreme Court, in its September 26 judgement, struck down Section 57 of the Aadhaar Act. This section allowed corporate bodies to authenticate customers by capturing their biometrics or Aadhaar numbers and validating them against the Aadhaar database.
Fintech companies that could no longer access Aadhaar were unable to provide instant onboarding services to their customers.
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Hurdles for expansion
“We are still awaiting for more clarity and also we understand that the final amendments will be done by Parliament but the intention is clear that the government is making an attempt to give us access to the citizen registry which is in itself a great news,” said a senior banker with a private sector bank.
Without legal backing, the JAM (Jan Dhan-Aadhaar-Mobile) trinity has been severely curtailed and has thrown up hurdles for digital expansion by fintech companies and banks.
“What is needed now, is to not restrict it only to banks and telecom companies, but to extend (Aadhaar access) to all entities regulated and licensed by the multiple regulators that we have,” said Naveen Surya, chairman of the Fintech Convergence Council which is an industry body for all fintech companies under Internet and Mobile Association of India.
Experts said the Reserve Bank of India’s guidelines on customer verification, or KYC, draws its strength from the PML (Prevention of Money Laundering) rules of the government. If the government makes amendment to the PML Act and the Aadhaar Act simultaneously then there will be a legal backing for making Aadhaar one of the options for ‘Originally Seen and Verified’ documents which is mandatory for customer KYC.
“It looks like they will cover entities under regulators like TRAI (Telecom Regulatory Authority of India) and RBI (Reserve Bank of India) but there are a bunch of fintech companies which are not regulated by anyone,” said another top executive of a payments company. “Companies might be following PML guidelines but that does not mean they are regulated, we need to understand how it will be applicable to them.”
In the wake of the Supreme Court judgement, the UIDAI had said it would provide offline Aadhaar verification, which will keep the consumer’s Aadhaar number secure and not reveal biometrics.
Bankers are of the view that even if the government amends the law, it will only allow offline Aadhaar verification. “Online authentication is not going to come back,” a top banker said.
