RBI decision to allow NBFCs to apply for Aadhaar-e-KYC authentication licence to promote digitisation: Fintech players

The Reserve Bank of India's decision to allow NBFCs and payment service providers to apply for obtaining Aadhaar e-KYC Authentication Licence will promote digitisation and check frauds, opined fintech players.

The RBI has said NBFCs, payment system providers, and payment system participants desirous of obtaining aadhaar Authentication License - KYC User Agency (KUA) License or sub-KUA License, may submit their application to the central bank for onward submission to Unique Identification Authority of India (UIDAI).

The Reserve Bank's initiative will also help in improving trust levels among customers because only licensed entities will be permitted to conduct eKYC, said Ankit Bhatnagar, head of product at Mswipe.

"Now with eKYC, non-banking entities offering financial services can improve compliance and also ensure that the popular mechanism of customer on-boarding for which they had to depend on third party players can be offered directly through a KUA licence," said Ankit.

Manoj Chopra, head of innovation and product development, Infrasoft Technologies Limited, was of the opinion that the move will simplify customer onboarding for NBFCs, NBFC-Micro Finance Institutions (NBFC-MFI), payment system operators, and payment system participants.

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NBFCs' are reliant on offline Aadhaar validation or paper-based authentication mechanisms like PAN verification. Since such methods involved sharing pictures of physical documents, it made the process slightly cumbersome and prone to rejections as the quality of pictures shared may not be up to the mark, Manoj said.

"Now, by availing Aadhaar Authentication License KYC User Agency (KUA) license or sub-KUA License these NBFCs can directly leverage an online database in Aadhaar and verify the identity including the photograph seamlessly," he said.

Commenting on the RBI's decision, Gurjodhpal Singh, CEO, Tide (India), said it is a welcome move for the fintech ecosystem.

According to Singh, this will promote digitisation, resulting in a forward-thinking approach to ensure fast delivery of financial products in the sector and thus, improve the experience for many customers who had been facing a lot of issues.

"This is one of the most positives moves for players in the ecosystem, and will help make the onboarding journey less bumpy for customers," Singh said.

Arpit Ratan, Co-founder and Chief Business Officer, Signzy, termed the RBI's decision "a truly democratic" move to power NBFCs, payment system providers and participants to make the digital journey of customers faster, simpler and secure.

"Given that RBI has lately been warning of frauds owing to improper KYC processes, providing a KUA license will definitely stem such activities and increase customers' trust in non-banking entities which are working hard towards offering affordable and accessible financial services on the go," Ratan added

The Reserve Bank recently cautioned the public against frauds in the name of KYC and advised not to share key information, like account details or passwords with unidentified persons or agencies.

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