Telecom KYC and mobile banking regulation: An exploratory study

Shriram P Ketkar, Ravi Shankar and Devinder K Banwet

Journal of Banking Regulation, 2014, vol. 15, issue 2, 117-128

Abstract: Given that mobile banking (m-banking) is considered an effective vehicle for improving the financial inclusion and for cost-effective delivery of financial services, there is a need to align the ‘Know Your Customer (KYC)’ process of the telecom sector with that of banking. This article explores the KYC processes of both the sectors and brings out the ‘issues and challenges’ associated with subscriber acquisition and customer document management of telecom companies (telcos). As the telcos do not have any exposure risk from prepaid customers, they tend to treat the KYC and document management of prepaid users merely as a compliance formality. They resort to lowest-cost outsourcing and heavily depend on a large ill-equipped field-force. This leads to inadequate capture of customer details and loss of many opportunities for completion/correction of records. The Banking and Telecom sectors will need to jointly address this by training the work-force and by bringing down the dependence on field-staff for verification/authentication of customer documents. It may be useful to review the penalty on defaulting telcos and enforce periodic verification of prepaid subscribers to align the KYC processes of the two sectors and achieve successful implementation of m-banking.

Date: 2014
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