HomeMedia CenterAadhaar verdict sends fintech players back to the drawing board

Aadhaar verdict sends fintech players back to the drawing board

The recent Supreme Court verdict on Aadhaar may bring in tough times for the fintech companies who used to conduct eKYC (electronic Know Your Customer) via Aadhaar. Not mandating Aadhaar for the verification process has sent some fintech players back to the drawing board to work out strategies for physical verification, which is usually a time-consuming and expensive process. Experts and industry representatives with whom THE WEEK spoke to feel that verification of customers will eventually move to a traditional mode of verifying individuals through physical ID proof.

Bhavin Patel, CEO and co-founder of LenDenClub, a P2P digital lending platform, says that a physical KYC check takes around 24 hours or more now in an ideal scenario and this change in processing will result in longer disbursal time and higher cost for the consumer. “Since many businesses are built over the past few years on the basis of eKYC via Aadhaar, a physical KYC verification will dramatically increase the costs to 30 per cent, which will add up another Rs 100 or Rs 150 and that will eventually increase the overall cost for the company as well as the consumer. It will hamper the government’s vision and financial inclusion plan,” remarked Patel.

Another industry expert Rajiv Ranjan, founder and CMD of PaisaDukan, a P2P lending platform, points out that there are 122 crore people in India who have Aadhaar cards, which has helped the verification process to a great extent since there are no fake, duplicate or non-existent people, making it a unique identifier of every Indian. “With the recent Supreme Court ruling making it optional for sharing of Aadhaar data with private entities, fintech companies that were trying to reach more than 150 to 200 million customers through eKYC will face a huge challenge. Aadhaar had enabled these companies to reach remote places without physical processing thus reducing the cost of operations to a great extent. Now the industry fears rise in processing fee and thus it will impact the overall cost of operations and turn around time for processing and delivery of services. Digital onboarding and e-sign were unique features for the current fintech industry which will severely take a blow,” added Ranjan.

Ranjan added that the government must bring out a legal framework to support the fintech industry to use Aadhaar. “There should be some consideration on including the regulated entities to use Aadhaar services similar to government services for passing on benefits,” added Ranjan.

Experts such as Alok Shende of Mumbai-based Ascentius Consulting observed that Aadhaar is the foundational layer of the architectural edifice of India’s fintech industry to a great extent and supplanting the authentication layer with brick and mortar alternatives will not only increase costs but also lead to scaling up issues. “More importantly, many of the emerging segments in the fintech industry, including the low ticket loans will turn into unviable businesses owing to increase in fixed costs per transaction,” remarked Shende.

Credit : Theweek.in

LenDenClub is India’s largest Peer to Peer lending platform which started operations in India in 2015. We have been helping lenders diversify their portfolio beyond traditional investment instruments ever since.

About

Lending

*Calculated as per the last 6 months’ average returns by lenders who lent for 12 months tenure

LenDenClub, owned and operated by Innofin Solutions Pvt Ltd (ISPL) is registered as a peer-to-peer lending non-banking financial company (“NBFC-P2P”) with the Reserve Bank of India (“RBI”). The Reserve Bank of India does not accept any responsibility for the correctness of any of the statements or representations made or opinions expressed by Innofin Solutions Private Limited, and does not provide any assurance for repayment of the loans lent through its platform.

LenDenClub is an Intermediary under the provisions of the Information Technology Act, 2000 and virtually connects lenders and borrowers through its electronic platform via the website and/or mobile app.

The lending transaction is purely between lenders and borrowers at their own discretion, and LenDenClub does not assure loan fulfilment and/or lending simple interest. Also, the information provided on the platform is verified or checked on the best efforts basis without guaranteeing any accuracy of the data/information verification. Any lending decision taken by a lender on the basis of this information is at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower, fully or partially. The risk is entirely on the lender. LenDenClub will not be responsible for the full or partial loss of the principal and/or interest of lenders’ lending amounts.

*This is an annualized yield and is subject to the maximum FMPP tenure, which is 5 years. P2P lending is subject to high risk and may cause an entire loss of principal.
 

*P2P lending is subject to risks. And lending decisions taken by a lender on the basis of this information are at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower.

© 2024 LenDenClub by Innofin Solutions Private Limited | CIN: U74999MH2015PTC266499