Facing difficulties after the Supreme Court ordered that Aadhaar cannot be made mandatory for financial/banking transactions, the payments industry wants the Reserve Bank to allow facial recognition-based software to meet the know-your-customer norms. The apex court verdict last year had made it impossible for the electronic payments industry to use the Aadhaar data for customer onboarding, necessitating an urgent search for alternatives.
The financial sector does not use facial recognition technologies anywhere in the world to check customer credentials and also to meet basic KYC norms. The Payments Council of India has proposed a model wherein a potential customer can upload the picture of a document and then sit herself before a camera, its Chairman Naveen Surya said, speaking at an event.
He said an algorithm can first check on the authenticity of the document uploaded and then match the picture in the document with that of the person sitting before the camera, which will establish the credentials and meet the KYC requirements. Surya also claimed that algorithms can indeed carry out the job but added the RBI is not yet fully convinced on the proposal and he thinks that RBI may take up to six months to accept the proposal, underlining that some alternatives of working around the Aadhaar verdict are essential.
The share of electronic payments has fallen back to the pre-demonetisation level of 10 percent of retail payment spends by value from a peak of 12 percent achieved soon after the note-ban, he said. Surya said his industry’s fight is against cash, where there is no restriction of up to a high level and said there is a need for the switch over to digital means.
He also welcomed the six-month extension granted to prepaid payment instrument issuers for complying with KYC norms due to the difficulties surrounding Aadhaar and said there is a need for the older style norms to change to a risk-based system. The industry is also keen on having a flexibility in regulations, where small value transactions using PPIs should not need a full KYC, he said.
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