For the time being, mobile wallets will not be allowed to do eKYC of new users with Aadhaar, BloombergQuint reports. This means that wallets like MobiKwik and Freecharge effectively can’t get new users unless they process conventional ID documents to enrol them. Meanwhile, companies like Paytm that also operate payments banks get a pass since the UIDAI is satisfied with payment banks’ compliance with data security norms. Airtel Payments Bank, however, isn’t cleared to use Aadhaar just yet.

Read: Airtel Payments Bank’s e-KYC suspension: A timeline of events

How this happened

On May 16, the Unique Identification Authority of India sent a letter to AUAs, who are allowed to use the Aadhaar database to auto-fill subscriber details after receiving consent from them. This way, they would get full verified demographic data as well as user authentication — KYC — in one go. Now, though, mobile wallets and Airtel Payments Bank have been excluded from this process until UIDAI is satisfied that wallets have the infrastructure in place to keep user data secure. It’s unclear just how or when UIDAI will evaluate that.

MediaNama’s take

Since Paytm, the largest mobile wallet in the country by far, can still do KYC using Aadhaar, for the time being, they have an advantage at growing their consumer base. Meanwhile, other wallet players are stuck manually collecting photocopies of traditional ID from people, effectively stalling their growth in the short term. As the RBI warned, a few big players dominating the payments space is risky. In the wallet space, where one player already has an inherent advantage owing to operating a payments bank too, withholding eKYC permissions may have an anti-competitive outcome.