The growth of digital payments has led to non-bank entities stepping deeper into financial services. With existing consumer relationships and innovative approaches to payments, they often feel they have something special to offer.
But at least one authority has demonstrated that it will tighten requirements on these non-traditional entities if needed, based on how they’re conducting their financial services business.
According to multiple reports in Indian media, the Reserve Bank of India recently sent a letter to leaders at payments banks owned by telecom companies, specifying that they must have their KYC information verified by regulated third parties that comply with the requirements of the country’s anti-money laundering laws.
The revised direction follows an incident last year in which the UIDAI barred a bank operated by a telecom company from conducting electronic KYC process of its payments bank customers, alleging that it had opened accounts for mobile customers without their knowledge or consent, according to Livemint.
(UIDAI is the Unique Identification Authority of India, the entity that administers the country’s Aadhaar national identification program.)
The Livemint article said that, prior to the new RBI direction, telecom companies were allowed to use their KYC checks from opening mobile accounts to streamline their process for opening bank accounts.
Paytm, an Indian payments provider that also operates as a payment facilitator, launched its own payments bank in January.
According to the Economic Times, Paytm has been conducting its KYC duties “from scratch” on more than 55 million customers.
A Paytm executive told YourStory last year that the company planned to invest $500 million into its KYC capabilities.