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NBFCs Wary Of Using Aadhaar Virtual ID, Say Limited Customer Details Increase Costs
Aadhaar
The Unique Identification Authority of India (UIDAI’s) decision to push for using the virtual ID (VID) for most services hasn’t gone down very well with non-banking finance companies (NBFCs), reports Mint. Following reports of Aadhaar data leaks, the UIDAI had set up the VID system to allow users to provide a temporary number instead of their actual Aadhaar number. However, the NBFC sector now says that this will increase the cost of customer acquisition.
The UIDAI classified all entities for the know your customer (KYC) verification norms as global and local. Local entities can only use the VID for authentication and includes NBFCs, prepaid instruments and telecom service providers. Global entities on the other hand can use either the VID or the Aadhaar itself. Banks and payments banks are currently classified as global entities.
The NBFC sector feels that due to the VID implementation, they would no longer have full access to customer data and therefore be forced to conduct additional verification steps including physical background checks, thus increasing the cost of acquiring new customers. Aadhaar data of customers is currently linked to their credit scores.
To overcome this NBFCs and other bodies including the Payment Council of India have written to the UIDAI seeking more time to implement the new system.
How does the Virtual ID system work? Watch this video to know more:
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