The mobile wallet companies are reportedly witnessing a decline in their user base in the light of the recent know your customer (KYC) norms. Apparently, because of the shrinking of the customer base many mobile wallets are considering cutting operations and also downsizing the workforce.
The downside of the stringent KYC norms brought in by RBI is that the customers are unwilling to fill in the KYC details for small-ticket transactions, and are actually going back to transacting through cash. In January 2018 the mobile wallets showed a jump of 14% from the number of transactions done in December 2017.
Companies are reporting that the cost attached to ensuring the customer compliance to the KYC norms would be well over $100 million. According to the statement given by an Amazon executive (payments) to media, the mobile wallet operators have extremely thin margins and which is why there needs to be a lot of focus on reaching the economies of the scale at the earliest.
As had been reported by People Matters in October 2017, the Renu Satti, the CEO PayTM Payments back had said that with the KYC norms becoming stringent the mobile wallet players are at a disadvantage because of the cost involved in getting customers to be KYC compliant. The disadvantage also becomes more apparent because unlike other financial banks they cannot provide physical debit cards, or even charge an interest rate on loans. And which is why the mobile wallets use unconventional methods like cross-selling financial products to generate revenue.
At a time when the Indian government is pushing the Indian businesses and public to start opting for digital payments, this could potentially be a step back in the direction.