Around 3 Million KYC transactions are done daily using Aadhaar. UIDAI has facilitated almost 7.5 Billion Aadhaar KYC transactions till date. It almost equals a transaction for every human on Earth in numbers.
Impressive, isn’t it?
There is a race by digital wallet companies around India to conduct KYC for every one of their customers. The deadlines have been changed multiple times, and as of now, stands at 29th February 2020 as stipulated by RBI.
Companies have failed dramatically in conducting KYC’s. Part of the problem lies in the costs associated with physical verifications which can run as high as Rs 250 per customer. Considering the costs related, Paytm would have to shell out around $350 Million to verify their 100 Million user base.
It is serious amounts of money spent to confirm if the customers are legit. It is the same process all major wallet companies would have to go through. The process is necessary, but the amounts associated with it is not justified. It is the reason these companies are on the lookout for solutions which could reduce their costs for KYC’s. Such a mandate was imposed by RBI to curb the money laundering happening through these platforms.
The underlying cause has not changed if we compare the need to have Aadhaar for Indian citizens with the need to have KYC for e-wallet companies — Reduce Defaulters.
The difference between both the processes is not as massive as the numbers have us believe. With Aadhaar, the procedure requires only one physical verification for an individual. While with the e-wallets, the verification process is repeated every time for each wallet used by an individual.
Repeating the same process multiple times is the problem.
The Indian government has spent close to $8 Billion to identify individuals through the Aadhaar project uniquely. Banks and communication companies have used the Aadhaar linking protocols to successfully onboard customers. It is possible with e-wallet companies as well except that the mandate requires physical face-to-face verification of customers.
It is where it costs as much for KYC.
The Solution to the large costs of KYC
There are a couple of questions that needs answering before we can get into any solution.
- Is the verification of an individual required every time for different e-wallets?
- Is the physical face-to-face verification process any better than the electronic counterpart solutions?
The answer to both the above questions could be a single word — Maybe.
e-Wallets may require individual verifications for exceptional cases where the documents furnished don’t match or have any discrepancy. Making it a mandate is a loss of human effort.
Similarly, the face-to-face verification processes employed today have flows which render the process just a formality. People regularly confirm verification requests from the KYC vendors from their offices instead of their homes.
The solution then is to have technology help with the scale of the problem. And, use the technology to verify the customer with digital KYC methods.
eKYC eliminates the need for a physical face-to-face verification process. The verification takes place electronically through existing identity documents like Aadhaar. The flow here is again that the process relies on the authenticity of another identifier like Aadhaar. But in effect, the efficiency is the same as getting physical verifications done by the company.
VidoeKYC could be the best solution. The process makes available validated electronic versions of KYC-related documents through a DigiLocker and makes these possible for verification by service providers with customer consent.
These solutions will ease the economics involved in the verification processes and would allow for a fast resolution of KYC needs. These solutions are already under consideration with the Finance Ministery.
Along with these solutions, the verification should ideally happen only once. We are far from such a scenario, but we could ease the efforts required with technology.
SpringVerify is the modern take on the age-old problem of employee verification being costly, tedious, and out of reach of small businesses. We are trying to build a platform where the employee verification process happens seamlessly and with minimal effort required from both the company and the employee.
We believe that employee verification is a must for any business. It is a critical process in ensuring that every employee working with you is faithful and could be trusted. CareerBuilder survey shows that a company stands to lose on average $17000 on a wrong hire. Read more here.
We have built the platform with blockchain and believe that it will change virtually everything it comes in contact with. Blockchain helps us in building a decentralized system that keeps all our data secure and immutable. Read more here.