Digital Wallets To Spend Nearly Rs 3,600 Crore To Verify Users Over Five Years

India’s two largest digital wallet companies will spend more than Rs 3,600 crore over the next five years to verify the identity of their customers after the central bank tightened know your customer norms.

Last week, Paytm announced an investment of $500 million (Rs 3,200 crore) over three years for know your customer compliance of its users. It’s smaller rival Mobikwik today said it will invest Rs 400 crore in five years.

KYC mandates banks and other financial institutions to obtain and verify information about customers’ identity and address to ensure services are not misused. The wallets, used to pay utility bills, shop online and even pay offline merchants, are looking to expand aggressively as the RBI allows a verified user to store up to Rs 1 lakh. The central bank also allowed fund transfers among KYC-compliant wallets.

Paytm and Mobikwik were among the biggest beneficiaries of Prime Minister Narendra Modi’s decision to scrap old high-value notes as the cash crunch that followed forced people to shift to digital payments platforms. While Paytm has 27 crore users, Mobikwik has 7.5 crore customers.

Paytm, also a payments bank that offers banking services except loans, commands a valuation of $7 billion after raising $1.4-billion from SoftBank Group Corp in May. Mobikwik raised Rs 225 crore in August from Bajaj Finance and expects additional funding of Rs 295 crore before March.

Mobikwik will spend Rs 100 crore in the next 12 months for KYC compliance of two crore users, co-founder Bipin Preet Singh said. “We expect an expense of around Rs 50 per customer.”

Paytm has a target of 50 crore KYC wallets over the next three years. It will hire over 10,000 KYC personnel, over and above its workforce of 10,000, Renu Satti, managing director and chief executive officer of its payments bank, said.

Mobikwik plans to contract over 7,000 people for Aadhaar based e-KYC.

The Reserve Bank of India released master directions last week that said mobile wallets with up to Rs 10,000 will need to have minimum KYC compared to Rs 20,000 earlier. Mobile wallets with a balance beyond the RBI’s limit would need full KYC.

“Paytm is a strong supporter of these guidelines as the KYC process will lead to greater safety and security of financial systems,” Satti said. “This will also ensure that only serious players are part of the financial market.”

Satti said it will help take financial services to hundreds of millions of under-served and un-served consumers.