Paytm Payments Bank stops adding customers as RBI faults its KYC process
01 August 2018
Paytm Payments Bank has stopped enrolment of new customers on its platform following the Reserve Bank of India’s observation that its process of acquiring new customers has not been not in conformity with the know-your-customer (KYC) guidelines.
Paytm is reported to have stopped enrolling new customers on 20 June, after an RBI audit found that the process of enrollment the company did not adhere to KYC norms in acquiring new customers.
“RBI has directed Paytm Payments Bank to stop onboarding of new customers with immediate effect,” reports quoting sources familiar with the matter said.
Another person, a company executive, said that Paytm is modifying its “account opening process to introduce ‘current accounts’ due to which new account creation process has been paused”.
RBI is also reported to have raised objections about Paytm’s chief executive Renu Satti as it considered her unsuitable for leading a banking services firm. RBI requires a banker at the helm of a payments bank.
Paytm, however, held that Renu Satti’s appointment was made on 19 May 2017 after an official approval from the central bank.
In a statement on Friday, Paytm said Satti had stepped down from her position as Paytm Payments Bank CEO to take on a new role within the company. She will be leading the new retail business at Paytm as its chief operating officer.
Paytm is yet to fill the position of the payment bank’s CEO. The spokesperson did not comment on whether Paytm has been told to stop enrolling new customers.
RBI also observed that Paytm should have better security mechanisms to store customer data and asked Paytm Payments Bank to have an office separate from that of One97 Communications Ltd.
The company recently moved its Paytm Payments team to a new facility in Noida amidst a surge in adoption of digital payments in tier-II and tier-III cities, which now account for half of its total user base.
Paytim, meanwhile, has achieved an annual run rate of five billion transactions and $50 billion in gross transaction value (GTV) - a sharp rise from June 2017 when the company’s GTV was $1 billion.
These include mobile phone recharges, bill payments via Unified Payments Interface (UPI), wallet transactions and all purchases made via the Paytm Mall platform or the Paytm payment gateway. It does not include National Electronic Funds Transfer, or debit and credit card transactions.
The payments bank business has been under the scrutiny of authorities, including the Unique Identification Authority of India (UIDAI), which had in December temporarily barred Bharti Airtel Ltd and Airtel Payments Bank Ltd from conducting Aadhaar-based SIM verification of mobile customers using eKYC (electronic know your customer) process as well as e-KYC of payments bank clients.
Paytm Payments Bank is a separate entity, with 51 per cent owned by Vijay Shekhar Sharma and the rest held by One97 Communications.
One97 Communications, the parent of Paytm, has raised over $2 billion since its inception, and is currently valued at over $10 billion.
Paytm competes with wallet players such as MobiKwik, FreeCharge and PhonePe. The number of mobile wallet users in India is expected to grow from the current 200-250 million to around 500 million in the next couple of years.
The entire user data in the Paytm app goes into a “data lake”, and a team in Canada uses it to formulate the rules of the risk engine and other software.