Indian FinTech Firms Look for Aadhaar Alternatives for KYC in Wake of Supreme Court Ruling

“The situation is only the latest illustration of the haphazard character of Aadhaar’s rapid evolution over the last few years, with government agencies and businesses applying the ID program in something of a regulatory and legal fog.”

The Indian Supreme Court’s decision to restrict the use of Aadhaar, India’s biometric national ID program, to government subsidy applications has thrown the country’s FinTech sector into confusion over Know Your Customer compliance.

While a number of electronic financial services companies had previously banked on using Aadhaar to verify the identities of their customers, the Unique Identification Authority of India, which administrates Aadhaar, promptly issued a circular after the September Supreme Court ruling ordering the country’s telecommunications providers to stop using Aadhaar for customer authentication. Now, as The Economic Times reports, FinTech companies are awaiting clarification from the Reserve Bank of India over how they can handle KYC compliance.

Some are still pushing for eKYC. The CEO of online lending marketplace BankBazaar, for example, told The Economic Times that allowing Aadhaar-based authentication “on a voluntary basis” would still comply with the Supreme Court ruling, which only stated that Aadhaar cannot be made compulsory for identity verification. Another, unnamed CEO from the FinTech sector suggested that selfie-based solutions that use facial recognition to compare end users with official identity documents could still be used for eKYC, even if Aadhaar isn’t used.

The situation is only the latest illustration of the haphazard character of Aadhaar’s rapid evolution over the last few years, with government agencies and businesses applying the ID program in something of a regulatory and legal fog. Some of that fog should be cleared when the Reserve Bank of India issues its guidelines for KYC, but when that will happen is not known at this time.

Sources: The Economic Times, Millennium Post

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November 6, 2018 – by Alex Perala