Aadhaar e-KYC is here to stay; fintech companies say most customers prefer it
Customers unlikely to resist Aadhaar e-KYC because of ease, speedy processing
- Sep 27, 2018,
- Updated Sep 27, 2018 4:32 PM IST
The immediate reaction after the Supreme Court verdict on Aadhaar -- disallowing private firms from forcing their customers to give Aadhaar details -- from fintech companies, NBFCs and NBFC-MFIs was that they might lose the convenience of e-KYC which made on-boarding of new customers easier and faster.
However, as things settle down it looks like the 'fear' is a little farfetched. It all depends on the way people interpret the judgement.
Some NBFC and MFIs believe the judgement doesn't change anything for them as the SC did not completely bar them from using customer's Aadhaar. They say the judgment has only said that Aadhaar is no more mandatory.
According to them, even if it is now only an optional ID for KYC (Know-your-customer), it would hardly make a difference as customers rarely resist giving out their Aadhaar numbers. They say even a customer would prefer an Aadhaar-enabled e-KYC as it hastens the whole process of loan disbursal.
Ajay Kanwal, MD and CEO, Jana Bank, says, "We are 100 per cent digitised, and we do e-KYC of all the customers. It is good for both the borrowers and us. It saves us from photocopying multiple documents, putting signatures and doing physical verification of documents."
He says that customers do not hesitate in sharing their Aadhaar details even if they do not force them to.
"Aadhaar number is purely for authentication (purpose). So, we tell our borrowers if you don't share Aadhaar number, then we have to do it manually and then there is cost to it," says Shankara Vaddadi, founder and director, I-lend, a peer-to-peer loan company. He says that 95 per cent of his borrowers put their Aadhaar number in the registration form.
The convenience that an Aadhaar-enabled e-KYC offers is tough to be replicated by any other IDs.
"With Aadhaar data, our database can directly talk to the UIADI (Unique Identification Authority of India, which issues Aadhaar numbers) server database and the verification is done real time by using artificial intelligence, predictive technology and data science," says Rachit Chawla, chief executive officer, Finway Capital, an NBFC and fintech company.
Vaddadi of I-lend says that they educate their customer that Aadhaar makes the life easier.
"We tell them that if you use the Aadhaar, then e-signature and other things can be enabled making the whole process much faster," he says.
Aadhaar-based e-KYC also helped in checking frauds and de-duplication of IDs.
Ratna Vishwanathan, former CEO, Microfinance Institutions Network (M-FIN), an association of micro-finance institutions, says that Aadhaar was good for de-duping. "There are certain regulatory restrictions on borrowings. You cannot borrow from more than two MFIs and you need a credit information report before you actually process your own previous borrower's request. Now, as far de-duping is concerned, other IDs eligible for KYC can all be duplicated. That's why we insisted on Aadhaar because with biometrics, the chances of duplication are minimal," she says.
Ratna further says that micro-finance institutions insisted on Aadhaar to also check over-indebtedness among customers who would take multiple loans by misrepresenting and duplicating IDs.
However, she says they can of course voluntarily ask them to give Aadhaar. "Unless the borrowers have any wrong intentions, they would not hesitate in sharing their Aadhaar number," she says.
The immediate reaction after the Supreme Court verdict on Aadhaar -- disallowing private firms from forcing their customers to give Aadhaar details -- from fintech companies, NBFCs and NBFC-MFIs was that they might lose the convenience of e-KYC which made on-boarding of new customers easier and faster.
However, as things settle down it looks like the 'fear' is a little farfetched. It all depends on the way people interpret the judgement.
Some NBFC and MFIs believe the judgement doesn't change anything for them as the SC did not completely bar them from using customer's Aadhaar. They say the judgment has only said that Aadhaar is no more mandatory.
According to them, even if it is now only an optional ID for KYC (Know-your-customer), it would hardly make a difference as customers rarely resist giving out their Aadhaar numbers. They say even a customer would prefer an Aadhaar-enabled e-KYC as it hastens the whole process of loan disbursal.
Ajay Kanwal, MD and CEO, Jana Bank, says, "We are 100 per cent digitised, and we do e-KYC of all the customers. It is good for both the borrowers and us. It saves us from photocopying multiple documents, putting signatures and doing physical verification of documents."
He says that customers do not hesitate in sharing their Aadhaar details even if they do not force them to.
"Aadhaar number is purely for authentication (purpose). So, we tell our borrowers if you don't share Aadhaar number, then we have to do it manually and then there is cost to it," says Shankara Vaddadi, founder and director, I-lend, a peer-to-peer loan company. He says that 95 per cent of his borrowers put their Aadhaar number in the registration form.
The convenience that an Aadhaar-enabled e-KYC offers is tough to be replicated by any other IDs.
"With Aadhaar data, our database can directly talk to the UIADI (Unique Identification Authority of India, which issues Aadhaar numbers) server database and the verification is done real time by using artificial intelligence, predictive technology and data science," says Rachit Chawla, chief executive officer, Finway Capital, an NBFC and fintech company.
Vaddadi of I-lend says that they educate their customer that Aadhaar makes the life easier.
"We tell them that if you use the Aadhaar, then e-signature and other things can be enabled making the whole process much faster," he says.
Aadhaar-based e-KYC also helped in checking frauds and de-duplication of IDs.
Ratna Vishwanathan, former CEO, Microfinance Institutions Network (M-FIN), an association of micro-finance institutions, says that Aadhaar was good for de-duping. "There are certain regulatory restrictions on borrowings. You cannot borrow from more than two MFIs and you need a credit information report before you actually process your own previous borrower's request. Now, as far de-duping is concerned, other IDs eligible for KYC can all be duplicated. That's why we insisted on Aadhaar because with biometrics, the chances of duplication are minimal," she says.
Ratna further says that micro-finance institutions insisted on Aadhaar to also check over-indebtedness among customers who would take multiple loans by misrepresenting and duplicating IDs.
However, she says they can of course voluntarily ask them to give Aadhaar. "Unless the borrowers have any wrong intentions, they would not hesitate in sharing their Aadhaar number," she says.