Telcos May Go Back To Traditional Mode of Verification After SC’s Aadhaar Verdict

In a historic verdict on Wednesday, the Supreme Court upheld the constitutional validity of the Aadhaar but struck down a few provisions, including Section 57 of the Aadhaar Act, calling it “unconstitutional”. This, in essence, nullified the entire fingerprint-based e-KYC model for verification used by telecom companies or banks. Since provision is no longer valid, private telecom companies will not be able to perform the Aadhaar-based e-KYC process. They are likely to go back to the previous process of physical verification of user identity documents.

The e-KYC process rid companies from hiring representatives to who would visit a customer’s place or verify details on call. It essentially took days before a mobile number was activated. These companies are now expected to go back to this previous process for verification, which could lead to delay in the activation of services. The e-KYC process had also influenced the performance of new entrant Reliance Jio in the telecom sector. In fact, the e-KYC is cited as a major reason behind Reliance Jio’s expansion across India in just a few years, especially in rural areas.

“Though the verdict is not affecting us, we believe that this will be a regressive move for fintech companies as they will eventually move to the traditional mode of verifying individuals and thereby the turnaround time for processing the loan will increase to a considerable extent,” Business Standard quoted Bhavin Patel, co-founder and CEO of LenDenClub, as saying.

However, experts also suggest Parliament will have to step in and allow its usage in specific cases for private companies. – Business Today