India’s mobile wallet companies are seeing red as angry customers threaten to stop using these digital platforms, which are struggling to comply with regulatory norms that required them to complete the verification of transacting customers on the last day of February.On Thursday morning, irate customers discovered that they were unable to top up digital wallets across a slew of service providers ranging from Paytm — the country’s largest — to others such as Mobikwik, Ola Money and Freecharge, if they had not completed what is referred to as the KYC procedure or know your customer. This verification process, stipulated by the Reserve Bank of India , requires companies to collect information from customers including their identification details and biometrics.Industry executives estimate that at least 8 out of every 10 customers using mobile wallets in the country have not completed KYC requirements.Digital payment transactions were estimated to be worth ₹12,568 crore in December, according to data from the central bank.“Feels disappointing #Paytm will be useless from today if you are not KYC compliant,” wrote a customer on microblogging site Twitter on Thursday. “Will wait for few days more. If no changes in laws, then will delete @Paytm. With UPI accepted and seamless, and major merchants still not accepting Paytm, I will be left with no choice,” he tweeted.“There is major chaos in the field,” said Bipin Preet Singh, chief executive officer of digital wallet company Mobikwik, which is insisting that customers submit their Aadhaar number to complete KYC.Meanwhile, some users of Paytm got money in the form of gift vouchers when they tried to recharge their wallets, while some only received an error message. Gift vouchers can only be used at merchant locations that accept Paytm payments.Paytm did not reply to detailed queries from ET for this report.In a written reply to queries from ET, cab-hailing startup Ola said besides Ola Money which is a wallet application they have embedded other payment modes for their consumers as well and even is in the process of briefing their drivers about the KYC process so that riders can be urged to complete KYC formalities for Ola Money.Industry experts are of the view that the prevailing uncertainty will lead to an erosion of nearly 30% in share of transactions for mobile wallets.“Based on the initial results, there will be a very significant deterioration in user base and customer usage, though it is early but in general, the PPI ( prepaid payment instrument) business model is eroded across participants,” said Sriraman Jagannathan, vice president for payments at Amazon Pay , which introduced its digital payment service last year.Jagannathan is also the co-chairman of the PPI committee at industry body Payments Council of India (PCI).It is not just independent digital wallet companies that are bearing the brunt of customer displeasure, even bank-led wallets are scrambling to complete KYC norms for their payment services.Users of HDFC’s PayZapp or SBI Buddy also received messages from their banks to get their KYC done in order to remain functional.“We are following different methods: paper KYC, electronic KYC through Aadhaar and OTP or getting a consent through the customer ID and OTP for our own customers,” said Ritesh Pai, chief digital officer at Yes Bank.Another industry segment, which is expected to be hit badly is the domestic remittance business which was primarily routed through mobile wallets. Players like Oxigen, PayPoint and Ebix-Cash would be impacted on their remittance side, said industry executives.The biggest challenge these companies face is the argument from consumers as to why they need to share so much details for small value money transfers.“As of now there is no compelling reason for the consumer to do a full KYC, when the RBI opens up interoperability for the wallets perhaps the conversions will go up,” said a top executive at a Mumbai-based wallet company.Mobile wallet companies are expecting a relapse to cash for small value micro transactions in the wake of compulsory KYC requirements as mandated by the central bank. This could reduce the total user base of wallets by anywhere between 80 to 90%, reckon industry executives.“Our initial experience tells us that they could all relapse to cash which would harm the overall digitisation agenda of the government,” said Singh from Mobikwik.Amidst the gloom, the only ray of hope is the interoperability feature — as promised by the central bank, which industry executives estimate will help them recoup lost ground. With interoperability, the wallet customers will be allowed to transfer funds to users of other wallet entities as well, which was prohibited till now.“Interoperability, is a step-forward for the ecosystem where the regulator has supported and committed towards offering it across all payment systems, both Rupay and UPI alike which will further widen the market,” said Bhavik Vasa, chief growth officer at EbixCash.