With demonetisation came the urgent need to transact cashlessly and digitally. Several difficulties arose from the absence of cash. But what will outlive those difficulties are the advantages of digital finance. We’re hurtling towards a future where we would buy financial products from the comforts of our home, using our smartphone, cashlessly, paperlessly, and without being physically present.
Here are some key deliverers of paperless finance and how they’re about to change the way you manage money.
e-KYC Via Aadhaar
The process of account opening is challenging for the financial institution as well as the customer. Speaking from the latter’s point of view, the e-KYC via Aadhaar OTP may solve several challenges to onboarding. Using their Aadhaar ID, customers may be able to open new accounts via OTP-based instant verification. E-KYC is already a reality today: you can open deposit accounts up to Rs 100,000 or loan accounts up to Rs 60,000 using the Aadhaar-based OTP e-KYC.
Any time you open a new account, you need to manually sign your application. In industry parlance, these are called ‘wet signatures’. With regulatory reform, they may soon be replaced by the e-Sign. The Information Technology Act, 2000, The Negotiable Instruments (amendment) Second Ordinance 2015 have given recognition to the electronic signature, and the Indian Evidence Act 1872 validates the authenticity of Digital Signature/E-Signature. It means that you can sign documents electronically. However, the industry awaits an explicit direction from the Reserve Bank of India for the adoption of e-Sign.
The e-KYC and e-Sign, accompanied with existing modes of cashless finance (such as UPI), will make it possible for you to open new accounts without stepping into a branch or even meeting a representative of the financial institution. There are always areas where it’s difficult to set up new branches or for representatives to reach customers. But with digitised finance, anyone can open new accounts instantly using Aadhaar-linked cellphones. Paperless financial products can be delivered via the internet. This reduces costs associated with physically onboarding customers via paper KYC, reduces last-mile difficulties posed by wet signatures and absence of branch offices and ATMs. The cost savings—2-3% for banking products, and 20-30% for insurance products – can ultimately be passed on to customers.
The writer is CEO, BankBazaar.com