KYC, or Know Your Customer, has been a part of banking and telecom lexicon for many years in India. But it was only towards the end of 2016 that it started to shed its earlier skin of being just a simple regulatory requirement. And to grow into its new skin as a maker or breaker of business fortunes.
The first indication came on 1 December 2016, when Reliance Jio, the latest entrant into India’s crowded and ultra-competitive mobile telephony space, announced it had signed up 50 million new customers in just 83 days. That would be record-worthy growth for any new app or internet service, but here, Jio was a telecom operator which was signing up people physically in a large country like India.
Jio claimed it had been signing up around 600,000 people every day, powered by “eKYC” – an entirely digital KYC that was enabled by Aadhaar, India’s unique identity number project.
All that new customers had to do was to share their Aadhaar number and authenticate themselves biometrically via a fingerprint reader. Powered by eKYC, by 21 Feb 2017, Reliance claimed it had reached 100 million subscribers.
That was the moment when the sharpest businesses and entrepreneurs all over India realised that KYC was no longer just a check-box.
Fast-forward to today and KYC has grown into a disruptive force that is reordering entire industries.
Mobile operators, digital wallets, insurers, credit card companies, wealth management apps, and, of course, banks have been desperately trying to befriend the ravaging KYC force by pestering their customers to get eKYC done using Aadhaar.
Even though India’s Supreme Court passed an order on 13 March indefinitely extending the deadline (it was earlier 31 March 2018) to link Aadhaar to various accounts and services, businesses seem to have realised there’s no winning against the KYC storm.
Telcos are spamming their customers for eKYC. Banks are inserting intrusive pop-ups in their online banking sites. Insurers are pestering their customers to perform eKYC, in some cases by threatening to refuse to honour a policy claim otherwise. Credit card companies like Amex are turning away new customers who refuse to provide their Aadhaar details.
A source in a large private sector bank who requested anonymity said, “The government was doing a daily roll call asking for an update on Aadhaar linking and see how many of your customers have been linked to Aadhaar.”
Digital wallets, the hardest hit category so far, have seen the number of transactions decline—by around 40-50% by some accounts—as there is resistance from users to update their accounts with Aadhaar leading to decreased usage. Amazon Pay says that its new customer adoption rate declined by 30% with the RBI requirement of an official document for wallets starting this month.