Indian payments companies must increase the use of technology to reduce costs and improve customer experience, said panellists at the VCCircle Payments Summit in Mumbai on Wednesday.
At a panel discussion on new regulations in the sector, the speakers also highlighted challenges such as the high-cost customer identification process, the need for regulations to keep up with technology and reducing friction for customers.
The speakers at the panel were Rohan Bagai, partner at law firm AZB & Partners; KA Srinivasan, partner and chief financial officer at Ventureast; and Sandeep Ghule, chief financial officer at digital payments company Udio. The panel was moderated by Mihir Gandhi, director at PwC India.
The discussion came in the backdrop of the Reserve Bank of India’s revised guidelines last year for prepaid payment instruments (PPI) and digital wallets, and enforcing strict customer identification norms to reduce fraud.
These new rules have meant that companies have had to undertake a tedious and expensive process of gathering customer identification both digitally and physically through the know-your-customer (KYC) process. Last year, Paytm Payments Bank had said it would invest $500 million to meet the RBI's KYC norms. Similarly, MobiKwik had said it would invest about Rs 400 crore over five years to comply with the KYC norms.
PwC’s Gandhi raised a question about the viability of small companies that have received a PPI licence but are often unable to afford KYC costs and are approaching big companies to be bought out.
Ghule of Udio said it would be myopic to think that regulations are making payments a difficult business. He said the industry has been making representations to the government to make the KYC process fully digital. The payments sector will benefit when the cost of merchant acceptance vanishes and the KYC costs fall, he said.
According to Srinivasan of Ventureast, any lending business will survive if its return on equity is high. Digital or e-KYC is better than continuing to rely on physical KYC, he said.
Bagai of AZB said while transactional security is paramount, there is a need to allow companies some relaxation to find innovative ways to conduct customer authentication.
Bagai also said that while PPI was envisaged as a ‘minimum-KYC’ payment method to help individuals transact on a day-to-day basis, collection of identification proofs and self-declaration from customers for full KYC has become burdensome for the industry. This, in turn, has made customer retention challenging.
Ghule said that through change in regulations and guidelines, the regulator has been trying to remove cases of fraud and bring more customers under the ambit of the banking system. The industry has submitted its recommendations for further dialogue on the subject, he said.
Bagai suggested that small transactions could get some relaxation from the purview of stringent norms.