A number of Fintechs who use the services of agencies who have access to the Aadhar database for e-KYC verification could find the process harder to complete, with a number of these agencies having their permission to access the database revoked.
A report by Economic Times states that while the UIDAI (Unique Identification Authority of India) has not released any official communication regarding the same, access has been denied following the observations made by the Supreme Court.
Agencies which provide the services of e-KYC verification can be categorised into two different entities, KUAs and AUAs. An AUA is an agency which provides Aadhar enabled services to members.
A number of new Fintechs have relied on KUAs or e-KYC User Agencies and AUAs or Authentication User Agencies to e-verify the details of new customers. With government regulations regarding KYC norms getting stringent, the limited access to the Aadhar database can impact the businesses of a number of players.
As of March 31 this year, there were 255 active KUAs and 310 active AUAs
While there are other means to verify the KYC credentials, e-KYC verification was not only quicker but also cheaper. While physically verifying KYCs can cost around Rs.100 per customer, e-KYC costs around Rs.15.
The move, while impacting smaller companies, will not have a major impact on banks, mutual fund companies, or insurers, since most of them are authorised AUAs/sub-AUAs themselves.
According to data, the number of e-KYCs have fallen from an average of 1.28 crore transactions per day to 3 on the first of April.
If access to the database continues to remain inaccessible, players might look towards using documents like the PAN or driving license to complete formalities. A number of them have also started physically verifying the details to ensure they can continue providing their services.