Adhil Shetty On Aadhaar-enabled OTP-based eKYC & Digital Payments

By Adhil Shetty | December 20, 2016

Interview With Adhil Shetty, Co-founder And CEO, BankBazaar.com

Simplified Aadhaar-enabled OTP-based eKYC can be a big boon to both customers and the BFSI sector itself. With demonetisation and the Government resolve to achieve a cashless economy, Adhil Shetty, Co-founder and CEO, BankBazaar.com, India’s largest online financial marketplace believes that it will help towards increasing financial inclusion and bringing in potentially hundreds of millions of unreached and marginalised Indians under the ambit of formal banking, all thanks to the power and reach of cellphones.

RBI recently allowed eKYC to use OTP for account opening. How will this simplify procedures for the consumers?

This small step by the RBI is a giant leap towards digitising finance in India. Financial institutions now have the option to onboard customers through an OTP (One Time Pin) based Aadhaar e-KYC process. Customers can use OTP generated through UIDAI on their mobile phone to complete the e-KYC process electronically. This completely paper-less and presence-less process can be used to open Term loans up to Rs. 60,000, or Deposit accounts holding up to Rs. 1,00,000 in a year.

The OTP-based Aadhaar e-KYC process is a mobile-based paperless and presence-less solution. Customers no longer need to be physically present at the bank branch to open an account or apply for a loan. The process can be done online at their convenience. This is also going to quicken and make the process friction-less as it only requires interaction between a customer and his cellphone. This is because these OTP based accounts, both deposit or loan, will have to be regularised to a standard account by completing the Customer Due Diligence (CDD) procedure within a year.

The onus of completing the Customer Due Diligence (CDD) is shared between the banks and the customer unlike earlier where the onus was on the customers to provide KYC documentation.

Further, the Aadhaar-based eKYC will ensure higher security as an applicant’s data can only be accessed with the customer’s consent and analysed instantly. Aadhaar, as it is biometrically de-duplicated, provides a higher level of security compared to other forms of identification. It will reduce incidences of identity theft, forging signature, and submission of fake documents.

The electronic platform helps banks to reduce the operating cost on processing paperwork. The reduction in costs is 2-3 percent in the case of banking products and 20-30 per cent in case of insurance products. Ultimately the customers stand to gain from the reduced cost of customer acquisition.

We are confident that it will prove to be a cost-effective and trustworthy alternative. Further down this road, we look forward to further modifications that electronify and make Customer Due Diligence completely paperless. A potential increase in the credit limits once the data shows that it reduces risk but increases convenience will also be welcome.

Finance Minister on Thursday announced various incentives in order to push the Digital Payments agenda? What is your view on this and how will these discounts help the common man?

These incentives on digital payments will give a further push to those undecided about going digital. As a predominantly traditional market, people are still uncomfortable transacting through digital means as they are still unaware of the convenience and transparency that digital transactions bring. Digital transactions through wallets and cards make keeping accounts simple, you have a record of every rupee you spend, which is not always the case with cash. Moreover, you have a bigger quantum of available funds at any time, based on the limits on your card, which is again not the case with cash. This means you are better covered for emergencies.

Digital payments are also convenient in the sense that you can do many things through your phone, such as transfer money to someone at your convenience instead of having to go to the bank.

And now, you are being rewarded for essentially making your life easier. The best part is that these incentives are aimed at transactions that are not very high value but are something almost everyone makes frequently. So they will build up customer confidence and help people take the next steps to going paperless, presence-less, and cashless.

How do you see digital payments impacting the rural economy? What opportunities will it bring for the rural economy as it is highly a cash-intensive economy?

We believe that with digitisation of payments, more and more customers will become part of the formal banking system. A large percentage of the rural population is still not aware of the benefits of banking and is dependent on local resources. Most importantly, digitisation will bring the rural population face to face with products like Insurance, overdraft, Mutual Funds etc. and will help customers from these unreached locations to access these useful financial products easily and quickly.

How do you see technology playing its part in order to push Adhaar based transactions? Do you think India is ready for this?

We were the first fintech company to talk about how simplified Aadhaar-enabled OTP-based eKYC can be a big boon to both customers and the BFSI sector itself. A few months back we launched the world’s first multi-brand paperless platform for online approval on unsecured Loans and Credit Cards. Many customers have already transacted with 100 percent satisfaction. It is based on an Aadhar-enabled platform and is very secure. As we are working at the core of it and hence understand the technology involved in it, I can say with confidence that India is absolutely ready for this.

Do you think Digital Payment agenda and Adhaar based transactions will help in increased adoption of other financial services such as Mutual Funds/Insurance, etc?

The customer is either not aware that such products exist or is not confident enough to apply for one. After they become a part of the banking system, it will be easy for the banks to educate and bring them face to face with such products and its benefits. Not only do they gain knowledge but can also compare various products to choose the right one and apply with confidence.

The entire process of purchasing personal finance products is very time consuming if taken offline. Also, some of the best products are not available offline as the brick and mortar establishment of financial institutions providing such offers is missing from these locations. With digitisation, customers can access the right financial product for themselves using their mobile and apply for the same instantly.

With restrictions on cash transactions, real estate and jewelry may not look like very profitable investment options now. Hence, Mutual Funds, which give an average CAGR of 15-16 percent, will gain popularity.

We have recently launched Mutual Funds based on the Paperless platform as well. We have been looking forward to this future for quite some time and have been working hard on innovating and developing paperless assets keeping the consumer and partners at the core, to drive friction-less, digital financial product consumption.

Additional Reading: Unified Payment Interface (UPI): Mobile Payments Now As Easy As An SMS

There are likely to be discounts on insurance premiums. Can you share more details on this?

From 1st January, 2017, people paying general insurance premiums will get a 10 percent discount and 8 percent discount for Life Insurance if the payment is made online. It is currently from Public Sector Undertakings (PSUs) and only if purchased from their respective websites.

This article originally appeared in The Hindu on 17th December, 2016.
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Category: BankBazaar ExpertSpeak

About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of BankBazaar.com. Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

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