After mobile wallet transactions fell 13% to 268.79 Mn in March 2018, looks like the wallet companies are ready to record more downfall in the first quarter of 2018, thanks to UIDAI (Unique Identification Authority of India), which in an attempt of data security has boiled the already heated temperature for digital payment companies.

According to an ET report, UIDAI has put restrictions on the access of payment companies to its database by classifying them as local authentication user agencies, citing concerns over their security systems.

It is to be noted that an authentication user agency (AUA) captures Aadhaar information from a person and submits them to the Central Identities Data Repository for validation.

Now, UIDAI has segregated this agency into two– Local AUA which can access limited information and global AUA which can access the complete information in the repository.

According to the report, UIDAI noted that “only global AUAs will be allowed access to full eKYC with Aadhaar number, while local agencies will have restricted access.”

These global AUAs are bankswhile under the local AUAs we have all payment companies and other entities in the authentication business.

In simple terms, this means that payment companies can only accept virtual Aadhaar numbers from consumers, which are provided by UIDAI for verification.

It essentially means the woo-woo magic that happened on devices with your Aadhaar number won’t happen anymore, rather you will have to source your virtual ID from UIDAI website and provide it to the authentication agency. Just another process for KYC-lazy customers, who have stopped using mobile wallets because of these requirements.

The UIDAI also noted that “some entities required to verify clients with Aadhaar number may not have the requisite security systems needed to use or store these numbers and have been precluded from the list of global AUAs.”

The Unending Saga Of e-KYC, RBI, UIDAI And Supreme Court

Ever since the RBI issued stricter KYC guidelines for digital payment users last October, the sector has seen some major upheavals. As earlier reported by Inc42the Reserve Bank of India (RBI) had refused to extend the deadline for KYC (Know Your Customer) beyond February 28, 2018stating that enough time has already been granted to adhere to the prescribed guidelines.

However, adding to the confusion, the country’s Supreme Court, on March 13, 2018, extended the deadline for mandatory linking of Aadhaar Card to avail various government services and welfare schemes. Reports claimed that more than 50% of the PPIs are still not KYC compliant.

Most recently, the RBI has asked all payment system operators in the country to store data – pertaining to their customers – within India. The move is geared towards ensuring that user details remain secure against privacy breaches. According to the directive, the payment system companies have been given six months to comply with the newly-released norms.

According to the industry estimates, the fall, in terms of the number of digital wallet users, has been somewhere around 80% to 90% and is largely the result of most customers shying away from full KYC authentication.

Notably, the completion of the KYC involves linking of Aadhaar card and PAN card to the e-wallet mobile applications. The RBI had earlier stated that the customers, who are not willing to follow the KYC process, could close their PPI accounts and get the balance money transferred into their respective bank accounts.

What Is Aadhaar Virtual ID?

Inc42 had earlier reported that UIDAI introduced the beta version of the VID (virtual ID) feature. In January, the UIDAI launched a two-layered safety net feature to avoid data breaches. This consists of a 16 digit Virtual ID and limited know-your-customer (KYC) for Aadhaar number holders.

With the virtual ID, there will be no need to share the real Aadhaar number at the time of authentication. Instead, a randomly generated 16-digit code will be shared with the agency every time.

This ID along with biometrics of the user, like the name, address and photographs, can provide the necessary details to the concerned agency, without being able to track the actual Aadhaar number of the user.

A user can generate multiple virtual IDs as per the need. The older IDs will get cancelled once a fresh ID is issued to the user. Since the virtual ID would get mapped to the individual’s Aadhaar number, the need to share the original Aadhar number would be done away.

While, the limited KYC feature will provide the agencies with only the essential details, thus avoiding the chance to track and store a user’s Aadhaar number. Agencies can do their own KYC and will identify users with ‘tokens’.

Also, as stated by the UIDAI in a media statement, “Agencies that undertake authentication would not be allowed to generate the Virtual ID on behalf of Aadhaar holder”.

UIDAI has been battling full house in the Supreme Court to defend Aadhaar system, claiming 13ft high and 5ft thick walls for Aadhaar data and at the same time, witnessing major data leaks. With the move of limiting access for local AUAs i.e. wallet companies, the attempt of controlling data security might also put off the digital push of the government.

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