BENGALURU: The Unique Identification Authority of India has written to a number of digital payments companies asking them to stop offering any Aadhaar-based service on their platform, in its first major directive following the recent Supreme Court ruling which prohibits private companies from using biometric-based authentication services.The central authority has directed several payments companies to provide confirmation of closure and to present a plan on how they will exit the Aadhaar ecosystem, in a written communication reviewed by ET.“Since your organisation can no longer use Aadhaar-based authentication services… you may cease all operations with respect to Aadhaar-based authentication immediately, if not already done,” the letter sent on October 12 stated.A clutch of private payments companies, including PayPoint, Eko India Financial Services and Oxigen Services have received notices from UIDAI in the last two days, asking them for “an action plan/exit plan for exiting the Aadhaar ecosystem which shall include without limitation the aspects enumerated under Regulation 23 (2) of the Aadhaar (Authentication) Regulations, 2016”.Industry sources in the know of developments told ET that the letters from UIDAI have been sent only to non-banking companies that are licensed to provide prepaid payment services. Banks, as well as payment entities such as Paytm that have obtained banking licences, have not received such notices, the sources said. UIDAI had not replied to email queries sent by ET at the time of going to press. Fintech executives are of the view that UIDAI’s firm stance will affect last-mile remittance and digital payments that form the mainstay of business for these companies.“Till the time new laws are framed the UIDAI may be developing offline verification processes so that fintechs can continue onboarding customers for their various services,” said Vivek Belgavi, fintech leader at PwC India. Apart from being disallowed from using Aadhaar for any of their services, these payment companies have also been directed to heed customer demand for delinking Aadhaar from their database. “We are now looking for alternate methods for digital KYC and are also seeking guidance from the regulator in this matter,” said Sunil Kulkarni, joint managing director of digital payments company Oxigen Services.On September 26, in a landmark judgement, the Supreme Court struck down Section 57 of the Aadhaar Act, thereby disallowing private companies from accessing and saving Aadhaar data. Payments companies that relied heavily on Aadhaar-based eKYC to drive customer adoption at low cost are now looking for alternatives.“We are also learning that there could be a solution around QR codes which is being developed,” Oxigen’s Kulkarni said. The Aadhaar card contains a QR code which carries the name, address and photograph of the card bearer that can be scanned offline and online and used for identification, even as the biometric information remains secure.Industry executives point out that several companies that have been notified are those which serve rural consumers or the urban poor reliant on remittances and for whom Aadhaar is an identity document in the absence of proper proof of residence and income. “Remittance shoots up during the festival season but this year there will be a huge blow for the digital payments industry as business will be directly affected,” said Ketan Doshi, managing director of PayPoint, a Mumbai-based remittance company.Payment companies relied on the Aadhaar infrastructure mainly to onboard customers through electronic KYC, since the Reserve Bank had mandated full KYC regimen for digital wallets. Payment executives are of the view that consumers unable to send money home through wallets will end up bearing the burden of GST , which will be levied on transactions through banking channels.ET reported in its October 12 edition that private banks, which have been slapped tax notices by GST authorities for income from remittance services, will pass it on to their retailers who in turn would pass on the cost to consumers. Previously, banks were taxed on the charge they received from business correspondents but now they also have to pay tax on the commission earned by retailers.