Wednesday, 17 October 2018

UIDAI revokes e-KYC, authentication services for Fintechcompanies

UIDAI, the nodal authority on Aadhaar has banned most of the non-banking finance companies from using Aadhaar based services. However, entities which have received banking licenses such as Paytm have not been issued such notices.

UIDAI has ordered several payment companies and NBFCs, not to use Aadhaar anymore.

In a letter to these companies, UIDAI said, “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,”

This is indeed ironical, as few months before, the same UIDAI was forcing these companies to use Aadhaar.

Which Companies Have Been Asked Not To Use Aadhaar?

Some of such companies which have been asked not to use Aadhaar based services are: PayPoint, Eko India Financial Services and Oxigen Services

Paytm have not been asked to stop offering and using Aadhaar-based services, since they are a recipient of Payments Bank license.

In the letter to these companies, UIDAI has ordered them to create an exit plan under Regulation 23 (2) of the Aadhaar (Authentication) Regulations, 2016.

On September 25th, Supreme Court had ordered all private companies and telecom operators to stop using Aadhaar for KYC.

The 5-Judges bench had struck down Section 57 of Aadhaar Act, which meant that the no private company can force any Indian citizen to submit their Aadhaar for KYC.

Infact, the exit plan order mentioned in the letter is based on Aadhaar verdict, wherein the Supreme Court had ordered all private companies to delete Aadhaar data of users.

Interestingly, companies like Paytm, PhonePe etc had stopped using Aadhaar for KYC almost a month before the verdict came out. Now, the most crucial aspect for all these NBFCs and Payment companies is the ‘exit plan’.

This means, they will need to submit their plans as to how they will delink Aadhaar numbers of users, and how that data will be destroyed.

The objective is: No private company should be able to store any form of Aadhaar data.

Exit plan for delinking Aadhaar has already been created and submitted to UIDAI by Jio, Airtel, Idea, Vodafone and others.

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