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Last Updated : Mar 23, 2018 05:22 PM IST | Source: Moneycontrol.com

With KYC norms kicking in, mobile wallet customers using gift cards to get around it

For instance, customers can add money to their Amazon Pay wallet by purchasing gift cards of Amazon. The gift card offers a code that once added to the wallet loads the money


Even as mobile wallets companies are struggling to ensure that the customers comply with KYC norms in order to load money to their wallets, customers are able to circumvent the process with the use of digital gift cards.

For instance, customers can add money to their Amazon Pay wallet by purchasing gift cards of Amazon. The gift card offers a code that once added to the wallet loads the money.

Sunil Kulkarni, joint managing director of wallet firm Oxigen and Payments Council of India, also said that some wallet firms were offering gift cards to stash money in the wallets. He however declined to comment on the names of the wallet firm.

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Users of prepaid payment instruments (PPI) such as mobile wallets were asked to complete the KYC requirements by February 28 by the Reserve Bank of India (RBI). The regulation bars customers from loading money into their wallets if they haven't complied with the KYC norms. It also restricts them from carrying out remittance-based transactions. They will also not be allowed to transfer the cash in the wallet to their bank accounts.

Amazon Pay balance shows two segments – money and gifts & credits. While ‘money’ consists of the amount deposited by customers in the wallet, gifts & credits are mostly the amount retained from gift cards.

Amazon agreed that it was possible to swell 'Amazon Pay' account (that consists of money and gifts & credits) via gift cards. However it added that the same can't be used by the customers for P2P transactions or transferring the money back to the bank account.

The customers though will be able to make purchases on Amazon’s website and third party vendors such as BookMyShow with that money.

“The difference between gift card and the wallet is that firstly gift cards have an expiry date of one year. They money that you put in your wallet does not expire. The second difference (in the case of wallet money) you are allowed to do a peer to peer transfer and also take that money back into your bank account once you do a full KYC. However with the gift card you do not have the option of doing these things,” Shariq Plasticwala, director, Amazon Payments told Moneycontrol.

Amazon doesn’t offer P2P lending as of now. Plasticwala declined to comment on Amazon’s plan to launch the service in India.

“We need to understand the spirit of the regulation. It is meant for the stored value account. The purpose of which is a flexible instrument that will allow for P2M, P2P and P2B transaction. As in the customer will be able to pay a merchant, a peer and bank out that money to the bank account. When you all allow all these ways to take money out of a container that leads to all kinds of risks," said Mahendra Nerurkar, director and chief executive officer, Amazon Pay.

“Now the gift card instrument has a purpose of gifting and the gifting instrument can only be used in certain scenario which is paying to merchants who are already KYC-ed entities,” he added.

KYC or know your customers has been made mandatory by the Reserve Bank of India (RBI) for all wallet firms. Users of prepaid payment instruments (PPI) such as mobile wallets were asked to complete the KYC requirements by February 28.

Those who do not comply with the KYC norms will not be allowed to load money into their respective wallet accounts or carry out remittance-based transactions. They will also not be allowed to transfer the cash in the wallet account to their bank accounts.

However, users are allowed to use the balance amount in their respective wallets to pay for goods and services. Once the balance is exhausted, the users are not allowed to load cash again until the KYC norms are complied with.

Payments Council of India has asked the RBI to withdraw the full KYC requirement or extend the deadline for it but the central bank has not responded to the demands so far.

According to RBI data for December, 31.98 crore transactions with a collective value of Rs 14,334 crore were performed during the month through prepaid instruments.

Mobile wallet transactions make up a large chunk of these transactions, accounting for 28.83 crore transactions worth Rs 12,568 crore.

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First Published on Mar 23, 2018 12:20 pm
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