Budget 2023: How Fintech Industry Is Reacting To Simplified KYC Process

Sitharaman announced that Permanent Account Number (PAN) will be used as the common identifier for all digital systems of specified government agencies.

The fintech industry has reacted favourably to the KYC announcement.  ( Image Source :Getty )

Finance Minister Nirmala Sitharaman presented the Union Budget 2023-24 in Parliament on Wednesday. Among other things, the Union Minister announced that Know Your Customer (KYC) process will be simplified in the country, opting for a ‘risk-based’ approach instead a “one size fits all” measure. 

Sitharaman announced that Permanent Account Number (PAN) will be used as the common identifier for all digital systems of specified government agencies. “This will bring ease of doing business and it will be facilitated through a legal mandate,” she noted.

Regulators of the financial sector will also be encouraged to have a KYC system “fully amenable to meet the needs of Digital India,” Sitharaman said. 

The Minister also called for a one-stop solution for reconciliation and updating of identity and address of individuals maintained by various government agencies, regulators, and regulated entities. This will be established using Aadhaar and DigiLocker service as “foundational identity”.

The fintech industry has reacted favourably to the announcement. 

“The new KYC PAN Norms introduced during the Union Budget 2023 is a welcome move, primarily because customers are linked to a single digit number, which is the PAN — so, will make banking easier,” said Finway FSC CEO Rachit Chawla. 

“It is a good move from a financial regulation standpoint as well as the customer standpoint, now that customers will only be giving pan as their KYC. In a nutshell, it is a win-win situation for both the government and the customers as well,” Chawla added.

BankBazaar CEO Adhil Shetty said, “Each financial regulator will now review and release updates to master KYC. National data governance policy for access to anonymous data will enable public goods for big data."

“The Union Budget 2023 shows a strong commitment to India’s digital future. The KYC PAN norms are a very welcome move which was much required. We applaud the government’s initiative which will provide much relief to the users,” said George Sam, co-founder and Business Head of Mindgate Solutions. 

As per Escrowpay founder and Managing Director Ashwin Chawwla, the Centre’s move would enable it to “identify individuals across different agencies without having to maintain separate records for each agency. PAN will be the sole identifier and would help in stopping multiple submissions for MSMEs.”

“The UID/UAN will be used to securely store and access personal information of citizens, and to facilitate access to government services. Additionally, it will also enable the government to better track the usage of public services, improve public service delivery, and reduce fraud and corruption,” Chawwla added. 

India’s crypto players also reacted to the new KYC norms.

“Simplifying the KYC process to meet the needs of Digital India is a progressive move by the Financial Minister,” said Mudrex co-founder and CEO Edul Patel. “By streamlining the process, financial institutions can now onboard new customers more efficiently and provide them with convenient access to digital financial services. This development enhances the customer experience by making the process faster and easier, promoting financial inclusion as part of the Digital India initiative. Additionally, this drive towards simplification fosters growth in digital financial services and contributes to creating a more digitized and inclusive economy.”

WazirX Vice President Rajagopal Menon shared his thoughts as well, “It's a big step to abandon the ‘one size fits all’ approach to Know Your Customer (KYC) procedures. It can help by enabling a more tailored and risk-based approach to client identification and verification. By decreasing the quantity of extraneous information and documents needed, this can lead to a more efficient and effective KYC process, as well as a better customer experience. Furthermore, adapting the KYC process to the individual risks posed by each customer can help to improve the business's overall security and compliance.”

Ashish Singhal, co-founder and CEO, CoinSwitch, offered his take, "The Union Budget 2023 has unveiled several new policies and initiatives designed to foster growth through digital transformation. It's great to see the financial sector as one of the seven priority sectors in the budget. While we are still reading the fine print, the thrust to improve financial literacy and to build DigiLocker as a one-stop KYC solution are positives for the Wealth Tech Ecosystem. The government’s continued focus on financial inclusion, building digital infrastructure, entrepreneurship, and up-skilling our youth will have a great impact on the economy."