Digilocker Downtime Creates Chaos for Fintech Customer Verification

The customer onboarding process for stockbrokers has faced significant disruptions as Digilocker, a key digital verification platform, experienced downtime since January 1. The outage has left digital broking startups and fintech companies struggling to comply with mandatory know-your-customer (KYC) procedures, according to industry sources.

Role of Digilocker in KYC Processes

Digilocker, operated by the Government of India, is a secure cloud-based platform that allows citizens to store and share essential documents digitally. Financial institutions rely heavily on this platform to fetch customer documents with consent, simplifying the KYC process.

As per sources, A senior executive from a digital broking startup revealed the extent of the problem: "We are entirely dependent on Digilocker for customer verification and over the last two days we have been struggling big time to onboard customers because of the outage".

Possible Link to NIC Service Disruption

The exact cause of the outage remains unclear. However, industry insiders suspect it may be linked to service disruptions at the National Informatics Centre (NIC) on December 31, which also affected IRCTC’s train ticket booking services on January 1. The NIC is responsible for powering government IT services and advising authorities on advanced technology solutions.

As of late January 2, sources indicated that the Digilocker issue had been resolved, though the Ministry of Electronics and Information Technology has yet to comment on the matter.

Challenges for Fintech Players

For fintech firms, Digilocker is one of the few verified systems that conduct seamless online KYC processes. Alternatives, such as manual scanning and uploading of documents, are not only inefficient but also susceptible to fraud. Additionally, most tech-driven platforms lack backend systems capable of effectively processing scanned documents.

Digilocker: A Critical Component of Digital KYC

Digilocker has been a game-changer for tech-savvy users, eliminating the need to scan and upload physical documents. Customers simply grant platforms access to their Digilocker accounts, enabling efficient document verification.

The Securities and Exchange Board of India (SEBI) mandates digital KYC processes to utilize platforms like Digilocker, followed by video KYC. While brokers with physical branches can rely on paper-based processes, digital-first firms face significant hurdles during such outages.

A Widely Used Platform

According to Digilocker’s website, the platform boasts 434.9 million users and has issued 9.4 billion documents. Citizens frequently use it to store crucial records, such as mark sheets, driving licenses, and vehicle registration documents.

This incident highlights the importance of building resilience in digital public infrastructure. While Digilocker remains a cornerstone of India’s digital ecosystem, developing alternative solutions and reducing reliance on a single platform is crucial to prevent future disruptions.

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