Wallet Usage Has Declined After Mandatory KYC Norms, But Not As Much As Experts Had Feared

It might not be the dramatic crash that some people had anticipated, but digital wallet usage in India has fallen sharply following the RBI’s mandatory KYC requirements that came into place from 1st March.

RBI data shows that transactions through mobile wallets fell 13% in March over February, going from a 310 million transactions to 268 million transactions a month. The fall in the value of transactions was even greater, which reduced 23%, going from Rs. 13,100 crore in February to Rs. 10,000 crore in March.

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This is a reversal for wallet usage in India, which had been increasing steadily since the government’s demonetization move in November 2016. But the fall in transactions in March is primarily because of RBI’s regulations that required mobile wallet users to have completed their KYC checks in order to continue using their wallets. RBI’s regulations, which were were initially to come into effect by the end of 2017, but were delayed to February 2018 following the request of wallet companies, require that users must’ve submitted an identity proof (one of PAN card, driving license, among others) to use their wallets to pay other merchants; users needed to complete a full KYC through Aadhar to continue paying other wallet users.

Since they were introduced, users had taken to mobile wallets primarily for their ease of use — one could simply link a phone number and start making payments. But the requirement to add personal details was expected to put many people off mobile wallets all together. Some estimates had said that 90% of users could stop using mobile wallets entirely, partly because alternatives, such as UPI, had emerged, and partly because mobile wallets would no longer have the same convenience — and anonymity — they once did. This had been corroborated by wallet companies, who’d said that only 40-45 percent of their users had completed their KYC checks.

But it appears that most users who actively transacted through wallets did go ahead and get their KYCs done. While wallet usage fell in March, a 24% fall in transactions is lower than many had feared. The fall in transactions, at 10%, is probably lower than what anyone expected following the implementation of the RBI guidelines.

This should come as good news for wallet companies — while their overall user-bases will have declined, RBI’s wallet usage numbers appear to show that most loyal wallet users not only completed their KYC checks, but also are continuing to use their wallets as much as before. But it might also be wise to exercise caution in declaring that wallets have emerged unscathed from the KYC googly that was thrown their way — it’s possible that in March, users were simply spending the remaining amounts in their wallet balances in paying for goods, and won’t recharge them once their balances run out. While a clear picture over the future of wallets will only emerge after the RBI releases data from April, initial signs do indicate that while India’s digital wallets might have been hit, they’ll probably live to fight another day.