Strict operating norms like Know Your Customer (KYC) for e-wallet service providers, coupled with higher transaction charges and lack of digital infrastructure, are adversely affecting Prime Minister Narendra Modi’s push for making India a cashless economy, experts have said.

KYC compliance norms, which are mandatory for the use of e-wallet platforms, are proving to be the biggest hurdle for users as well as service providers to promote e-wallets as seamless payment platform options in the country.

The full KYC requirements of the Reserve Bank of India (RBI) have put extra burden on cashless transaction service providers, which include e-banking (or banking over computers or mobile phones), debit and credit cards, card-swipe or “point-of-sales (PoS)” machines and digital wallets as the KYC compliance costs Rs 140-Rs 190 per customer, depending on the location and documents, industry professionals, whom The Sunday Guardian spoke to, said.

Amit Singhal, Managing Director of Satyam Consultancy, told The Sunday Guardian: “The government needs to shape a policy that simplifies KYC requirements, making digital payment transactions more user friendly. Building merchant acceptance networks, setting up common payments infrastructure and developing a proper framework for grievance redressal are some of the important measures to follow for the promotion of a cashless economy.”

“Government and regulators take a long-term initiative for promoting e-payment as an option instead of cash in the country. The regulators particularly need to focus on awareness programmes such as giving incentives to those who opt for digital payments as an option for transactions,” Singhal added.

Sachin Bhatia, chief executive officer of Metro Infrasys, a consultancy firm, told The Sunday Guardian: “The Central bank’s proposal to make full KYC norms mandatory for inter-operability among digital wallets could emerge as an expensive proposition for the budding electronic payments industry. When mobile number itself is given towards compliance of KYC norms, repeated KYC is just a wastage of time and money of customers and service providers as well.”

Bhatia further asserted that security and the lack of quick redressal mechanisms are some of the important concerns. “Hackers are getting smarter day by day as we get more dependent on electronic modes of payments. In general, getting your grievances addressed by banks is rather unpleasant and tedious,”he added.

According to experts, there are several other challenges on the road to making India a cashless economy, including lack of Internet reach. As per TRAI (Telecom Regulatory Authority of India) data, as many as 73% of Indians do not have Internet access. Among those who use the Internet, no more than 13% live in rural India. However, the Payments Council of India that represents over 60 payment companies is hopeful of completing the KYC compliance process till 2020.

 

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