There has been a growing hue and cry out there in the streets with many saying that the verdict handed out by the Supreme Court (SC) bench on the constitutional validity of Aadhaar spells troubles, if not doom, for the fledgling fintech industry. Much before the ink dried on the judgment, some even foresaw the end of the road for these disruptive players who have seen an exponential surge in business growth due to the single-point, digital, Know Your Client (KYC) verification system.
It is a truism that the unique identification number or Aadhaar has been the force multiplier contributing immensely to the growth of fintech platforms in the past. The use-case utility of this unique number was and is central to the business model of most of these firms since it shrinks their operational cost. Instant KYC verification system using Aadhaar cuts the cost of customer acquisition significantly giving a lead for fintech firms over competition in terms of business acquisition and product delivery.
There is no denying that the SC verdict will punch a hole in the fintech firms’ business model going forward. Since the verdict puts the breaks on private businesses seeking the Unique Identification Number for KYC verification, it inter alia clips the ability of firms to pull out client details expressly. This will raise costs for the industry because the firms will no longer enjoy the advantage of verifying the bona fides of a customer digitally.
However, this does not mean the end of the road for the fintech industry as some put it. It is my firm opinion that such views are nothing but much ado about nothing. With conviction, it can be said that market dynamics will sustain the growth momentum in the fintech vertical going forward. This is because Aadhaar, as the honourable Sup-reme Court rightly said, has become more or less a household term and touches the everyday lives of almost everybody. As on end-March 2018, approximately 90 per cent of the population in the country has been covered by the Unique Identification Number, Aadhaar.
Therefore, the only issue left is gaining access to Aadhaar details of individuals by private businesses including fintech firms. Notably, the SC verdict does not preclude any willing citizen from sharing this information with anybody for either executing a commercial transaction or otherwise. This takes us to the heart of fintech firms’ business model set against a dynamic market setting.
It is no secret that the lean and nimble fintech firms managed to disrupt the financial firmament with their agility and ease of doing business. Customers started flock-ing to fintech enterprises since they offer minimum transaction time and lower cost – factors that tipped the scales in their favour. The SC verdict has not changed this situation since it did not say private firms cannot access or use Aadhaar details. Customers who want to avoid the long waiting period and avail financial products in the shortest possible time will therefore continue to turn to fintech firms to meet their needs.
Suffice it to say that as long as Aadhaar continues to be available as a KYC document with the consent of the customers, there is no immediate worry for the fintech firms.
(The writer is founder and managing director of TMW (The Mobile Wallet )