Despite the regulators insistence on adhering to prescribed norms, many payment firms seem to be lax in conducting bank-grade KYCs. This and more in todays ETtech Morning Dispatch.
As fintech startups try to onboard merchants faster than competition, theyre mostly conducting only the basic checks prescribed by the RBI and skipping enhanced due diligence which could help keep fraudsters away. Large payment companies are approaching KYC more as a security checklist — perhaps for cost considerations — than a monitorable mandate by the RBI.
The RBI action has triggered debates over innovation in the fintech sector, the quantum of punishment to Paytm, the style of regulation and, of course, the KYC norms, which is the nub of the Paytm issue.
Industry insiders and startup founders pointed out that the KYC (know your customer) issues around Paytm Payments Bank might not be unique to one company; many startups end up taking shortcuts to onboard customers quickly. And once a company grows in size, managing risk and compliance becomes a big challenge.
Happy 2024! Welcome to the first edition of ETtechs Top 5 in the new year. Tata groups digital payments business, Tata Payments, has secured a payment aggregator licence from the Reserve Bank of India (RBI). This and more in todays edition of our daily evening newsletter.