RBI Commences Low-KYC for FinTech Customer Retention

The Reserve Bank of India (RBI), on February 5, introduced ‘low-KYC’ to let non-compliant know-your-customer accounts continue paying via mobile wallets. Prior to this, the RBI had recommended payment companies to conform to ‘full-KYC’ by February 29, 2020. As a result, approximately over 200 million mobile wallets were under the risk of getting cancelled by the regulators, owing to the approaching deadline of upgrading the non-compliant accounts to ‘full KYC’ account. Apart from this, RBI has also recommended video-KYC as an alternative to establish customer identity.

Therefore, now, mobile wallet firms such as Paytm, PhonePe, Amazon Pay, etc. and their user-base running into millions would be able to continue their association per the permission from the RBI allowing wallet service providers to continue operating their millions of non-compliant KYC accounts without any transnational limits.

With this new alternative of the RBI, a mechanism will be offered to customers wherein they will be able to convert their ‘minimum KYC’ accounts to the RBI’s ‘low-KYC’ PPI (Prepaid Payment Instrument – a semi-closed retail payment instrument introduced by the RBI in December 2019, having a monthly rechargeable limit of Rs. 10,000 or of Rs. 1, 20,000 in a Financial Year, and which is issued based on the sourcing of essential minimum details from the customer –) accounts.

This comes as a sigh of relief for FinTech firms as they were finding it difficult to onboard fresh customers and retain them following the barring imposed by the Supreme Court on telecom companies and NBFCs concerning the usage by them of Aadhaar-based KYC in 2018. Now onwards, companies will seek customer consent prior to performing ‘low-KYC’ of their accounts. However, it should also be noted that while KYC formalities were already done before, these were rendered null and void following the earlier pronouncement of the restrictions of the Aadhaar KYC method by the Supreme Court.

Following this, in February (2019), the Union Cabinet had considered promulgating an ordinance to permit voluntary use of Aadhaar number as a proof of identity for bank account opening and also for obtaining a new mobile phone connection. While the payment firms had also sought from the regulator an alternative to eKYC for onboarding and verification, the Payments Council of India (PCI) also requested the regulator to postpone the conversion of minimum-KYC accounts to full-KYC accounts deadline till February 28, 2020, owing to Aadhaar restrictions pertaining to eKYC process.

Other proposed formats of KYC in the pipeline include live video customer verification and XML internet format. It has also been reported that Amazon Pay had considered doorstep KYC for its mobile wallet subscribers.

The Code on Social Security, 2019 – What’s in it for Gig Workers?

The Code on Social Security (“the Code”), having the capacity of impacting over 50 crore workers in India, now stands approved by the Union Cabinet. The Code, introduced by the Labour Minister Santosh Kumar Gangwar on Wednesday (December 11, 2019) in Lok Sabha, swaps 9 laws associated with social security; noteworthy among these is the Unorganised Workers’ Social Security Act, 2008. Social security generally signifies various measures initiated to make sure reasonable access to healthcare and the provision of income security to workers if offered. Establishing a social security fund with the help of the corpus available under corporate social responsibility is advised, so as to offer welfare benefits to all workers. Why this proposal is special is since it also includes gig workers under its purview.

Gig workers

The Code indicates that as for the schemes for gig workers, platform workers, and unorganised workers, the financing of these is planned to be done via a mixture of contributions from the employer, employee, and the appropriate government. However, there is more to it than this; the central or state governments could also, under the purview of the Code, notify specific schemes for gig workers, platform workers, and unorganised workers, say in the form of offering such service professionals with various reimbursed benefits, viz. life and disability cover. The Code identifies Gig workers as those workers who work outside of the traditional employer-employee relationship (e.g., freelancers or independent contractors). Platform workers, for instance, are such workers who access other organisations or individuals via online platforms and earn money by offering them with specific services. Unorganised workers also comprise of home-based and self-employed workers.

Talking about home-based unorganised (gig) workers, it should be mentioned that even though the third-largest economy in the world is amidst a slowdown (per the International Monetary Fund), the skillful housewives of India are joining the promising trend of “cloud kitchens” to feed today’s hungry urbanites (millennials), that also too late in their (ripe for retirement) lives. Various app-based startups such as Curryful (dubbed to be the UBER of home-cooked food), Homefoodi, etc., have started offering a platform to housewives for offering home-cooked meals to the modern millennials. What this means is that the demography of the gig workforce is innovating with each passing month in India as various forms of service professionals are joining the market that erstwhile were expecting retirement in their lives. With such a robust presence of demand and supply matchup in the gig workforce and the startup markets, it certainly makes sense for the government to ensure timely social security measures for its unorganised, independent, young, adult, middle-aged, and also ageing elderly (still zealous) workforce.

This is because in stressed times (as the ones currently being experienced by our nation in the form of unrests), it gets difficult for gig workers who are discharging their duties in the middle of the road as food delivery-agents or cab drivers or e-commerce delivery agents to comfortably and safely fulfill their service obligations. In such uncertain times, it surely makes sense to have social security benefits of the required nature in place to make such vulnerable gig workers be able to protect themselves and safeguard the future of their dependent family members (via referring the code on occupational safety, health, and working conditions). The same goes for elderly home-cooking housewives who juggle with multiple duties, more so in their later years. Where in the western countries the trend of platform (app) economy jobs have been received negatively for having destroyed stable industries – the reasoning being the absence of the following: (i) workplace benefits. (ii) labor unions –, in India, the government has exhibited the necessary mindfulness towards initiating proactive steps (such as the Code on Social Security, 2019) in the direction of addressing these warranted concerns of the gig workers, their families, and various stakeholders.

GSTN for Gig Workers on Government’s Agenda

The Gig Economy service professionals in India are soon likely to officially fall under the purview of the Goods & Services Tax (GST) Network, per the Department for Promotion of Industry and Internal Trade (DPIIT). Doing so would entail placing online platforms such as UrbanClap, UBER, Ola, Zomato, BigBasket, etc. under the obligation to employ only such service professionals (gig workers) who have acquired a GST Number or GSTIN.

Intending to maintain a database of gig economy professionals in an organised format, the government is addressing much larger concerns that committed gig economy service professionals and the stakeholders have been voicing since long all over the nation (even internationally) – i.e., accessing the provisions of availing gratuity perks, consumer safety (ensured via gig workers’ tracing, and credential and qualification database), safeguarding workers’ rights, health and maternity benefits for gig workers, life and disability cover, old age protection, and the extension of Employees’ State Insurance Corporation (ESIC) workers’ benefits to gig workers.

This promising initiative is formulated under the auspices of the Social Security Code Bill (“the Bill”) that received approval from the Union Cabinet in December 2019. The Bill recommends formation of a social security fund via a corpus presented under the corporate social responsibility (CSR) framework.

The government, in its efforts to legitimise the gig economy and protect its workforce, is following the footsteps of other developed nations having already introduced GST liabilities to their independent workers. These include, for example, Canada and Australia, wherein, the former makes it mandatory for independent contractors to have to pay GST/HST (Goods and Services Tax / Harmonised Sales Tax) if earning above $30,000 per year; in the case of the latter, earning over $75,000 attracts the liability to pay GST. Apart from this, in Australia, those offering ride-sharing services are required to acquire an ABN and also register for GST irrespective of their income, per the mandate given by the Australian Taxation Office (ATO).

Formalisation of the gig economy in itself has also emerged as a promising forte as startups like HelloVerify now offer artificial intelligence and machine learning (AI & ML) powered gig workers’ screening services. Here, it’s worth noting that the nature of services offered by HelloVerify, complement the objective that the government of India is striving to achieve in its efforts to maintain a central database of gig workers’ credentials and informational particulars.