Is EPF advisory the next fintech goldmine?

Mint

26-05-2025

Pune/New Delhi: Mumbai-based Abhishek Shenoy (38) started his first job in 2008 but quit after a couple of years to study further. Later, he resumed his career and went on to work with multiple companies over the following years. Each time Shenoy switched jobs, he raised a transfer request to merge his previous employee provident fund (EPF) with the new one. To his surprise, the transfer never took place. 'I spent two-three years pursuing this but to no avail. I used to get several errors while initiating the transfers and was clueless about the way forward. Lack of information in the public domain made the process tedious," he said.
At this point Shenoy happened to find out about FinRight, a provident fund (PF) consulting startup founded by Mumbai-based Amey Kanekar, on LinkedIn. 'I immediately reached out to them. It took them only three-four months to get it all sorted against a fee of ₹10,000-20,000," he said.
Ramya Lakshmanan has a similar story to tell. The Bengaluru-based employee had lost all hopes of accessing the money accumulated in her PF despite having worked with seven companies in a span of 15 years. Not a single account had been merged with the other. 'I had different PF accounts. One was managed by a trust; another was as a contractual employee; a couple of accounts had no link to Universal Account Number (UAN), and some had different UANs. It was a total mess," she said.
UAN is a 12-digit number provided by the Employee Provident Fund Organisation (EPFO) to have a single identifier for the multiple member identifications.
Ramya's husband happened to find out about KustodianLife, a PF consulting startup, at a tech event. 'We verified the company's credentials and reached out to them. The mess was cleaned up in just three-four months. I only shared my documents and a few contacts of my previous employers. I made a test withdrawal to see if everything was sorted, and it sure was," she said. 'The fee turned out to be just 5% of the total PF balance finally accessible to me," she said.
Golden opportunity
The EPFO has around 300 million members in total (of which 74 million are active contributors). Most members are there by force—EPF enrollment is mandatory for organizations with more than 20 employees and the majority get caught up in a system too complex for them to understand.
This complexity has created a golden opportunity for fintechs trying to find an entry point into India's hyper-competitive financial services space. A few startups have smelt the opportunity in the thousands of crores languishing with the EPFO, hard-earned money that millions of Indians are desperately trying to access.
That opportunity is certainly huge. There are about 58.7 million claims per year (partial or full) and about 16.3 million are rejected. Even if 20% of rejections are solved by these startups at an average charge of ₹10,000 per case handled, this will amount to a market size of ₹3,300 crore per annum.
'The number of claims filed with EPFO has been growing at about 15% for the last two years. Considering growth of new contributing members at 10%, and rejection rate at 20%, we estimate the PF consulting market to grow in the range of 12-15%," said Amey Kanekar, founder, FinRight.
The Mumbai-based startup charges a flat fee of ₹2,099 in addition to GST for its services. However the charges can be customized per the work involved. Bengaluru-based Kustodian Life focuses on complex cases that need legwork. It charges an average of ₹25,000 for such cases and ₹6,000 for simpler ones.
What if people don't get their money after paying the fee? 'We are very careful while accepting cases. We don't take cases where chances of recovery are very low," explained Ketan Das, strategy and operations head at Finright. 'We take half the fee up front and the other half when the money comes," said Kunal Kabra of Kustodian Life. 'If it doesn't come, we refund the advance," he added.
Finright has an artificial intelligence (AI) tool that checks your EPF account history for issues that can lead to rejection of withdrawal applications. The company says around 3,000 people have availed of its full service and another 7,000 have used the platform at a more basic level. Altogether, it has helped people recover about ₹500 crore from the EPFO.
Kustodian Life's Kabra, who only counts 'full service' cases, says he has serviced about 350 clients and ₹90- ₹100 crore so far. 'The largest individual amount we have released is ₹1.5 crore," he added.
'A lot of venture capital funds are cautious about investing in firms like us because they worry about the runway—what if the government removes the roadblocks in EPFO withdrawal? I usually say to them: 'where is the incentive in the system? Opening a bank account has become easy in India, but try closing one'," Kabra noted with a chuckle.
For these fintechs, reclaiming PF money is only the starting point—they plan to use it as a launchpad to build broader businesses in personal finance and capture a much bigger wallet share. Finright, for instance, aims to become a full-service financial advisor and wealth manager using EPF as a bridgehead. Kustodian Life aims to cross-sell its wills and succession planning services.
The EPFO labyrinth
The EPFO is a masterpiece of Indian bureaucratic complexity. It is based on a law passed in 1952, designed for an industrial workforce of the 1950s and 1960s, that hasn't been updated. Employees have to contribute 12% of their 'basic pay' and this is matched by an employer contribution of 12%. This total amount, in turn, is invested in the EPF and Employees Pension Scheme (EPS), with the EPF fetching an interest rate of around 8% each year. The interest is tax-free.
However, a host of rules complicates the EPF system. To begin with, organizations can 'limit' the basic pay to ₹15,000 per month and hence limit EPF deductions to ₹1,800 (12% of the basic) per month. Alternatively, employers can contribute 12% of the 'actual' basic salary. In either case, 'basic pay (plus dearness allowance)' is a small fraction of the employee's total pay (called cost-to-company, or CTC).
The resultant EPF accumulation is too small to provide for retirement after a 30-year-career but large enough to take out for things like home-buying, marriage expenses, health issues or unemployment.
In the 1950s, employees largely had 'jobs for life' if they were in the organized sector. Moving around was not a frequent occurrence and hence the strain of transferring EPF between organizations was bearable.
The EPFO also allowed employers to manage their own EPF funds by setting up trusts called 'exempt PF trusts'. The idea was to let companies earn a bit more from smart investments and still match what the EPFO was giving their employees.
However, as the economy modernized and employees moved jobs more frequently, transferring EPF between organizations became a major headache. And when some of these were 'exempted PF trusts', the issues became acute. The result was a high rate of withdrawal rejections. Why? Simply because the employee had not successfully moved older PF 'pots' to the latest employer.
According to Finright's Das, failed transfers are the most common reason for rejection of EPF withdrawals. This is usually because employees do not know that they have to transfer old pots or do not know how to do it. The EPF website, with its multiple portals (separate 'member portal' and 'passbook portal') is not helping ease the situation.
Questions sent to the EPFO remain unanswered.
The EPS twist
Another equally bureaucratic complication is the EPS. The EPS occupies the largest chunk of the employer contribution of 12%, that is 8.33%, but earns no interest. Instead, you get a pension after the age of 58 based on a formula linked to the number of years of work, capped at ₹7,500, an amount that is woefully low for all but the poorest workers in India.
The EPS is open to two types of employees. First, those who joined before 2014 regardless of their basic salary. Second, those who joined after 2014 but with a starting (basic) salary of less than ₹15,000. Other employees (who joined after 2014 with a basic salary higher than ₹15,000) are not eligible to join.
However, large numbers of employees who move jobs fail to tell their employers whether they contributed to EPS in their old job or not—because they simply do not know. This leads to a current employer either contributing to EPS when it shouldn't be doing so or failing to contribute when it should be doing so.
'This messes up the EPF service history and leads to withdrawal rejection," explained Finright's Das. 'It's really a toss of the coin—whether you get it right on the form or not," he added.
That is exactly what happened to Bengaluru-based Bhavani BR. She was not supposed to be contributing to EPS but all her employers deducted it. When she made a partial withdrawal request, it was rejected for no fault of hers.
Bhavani was told to rectify the EPS mess. 'I approached my first employer. They had to fill up some form 3-A to correct it but they filled it wrongly and I was back to square one," she recalled. Eventually Kustodian helped her out for a fee of ₹42,000.
Attempting reform
The EPFO has been trying to reform its system, but it has a long way to go. It recently enacted three reforms: allowing withdrawal of EPF money from ATMs; ending the need for employer approval to seed bank accounts; and nixing the practice of requiring a cancelled cheque with a withdrawal request.
Of these, the first is skimpy on details but the second two carry procedural weight. 'Around 40% of the 74 million active members don't have their bank accounts seeded in their EPF accounts. The EPFO earlier required employer approval to seed the bank account apart from bank approval. Now, only bank approval will be needed," explained Das. But even the mere process of getting the bank account seeded may be difficult for many, which these fintechs may help solve.
The EPFO 2.01 project, also known as the Centralized IT Enabled System (CITES) 2.01, is another initiative that is underway to streamline operations. 'The project aims to provide a more efficient, seamless, and user-friendly experience for members. It is being implemented in phases. Thus, in the near future, it is expected that many changes in the services will come with more simplification," said Sanjay Kesari, regional provident fund commissioner-I (retired), EPFO.
But as digitization continues so will execution challenges. 'Large-scale digital transitions often come with gaps in user understanding, inconsistent system responses, and difficulty in resolving legacy issues. These hurdles inevitably create opportunities for specialized service providers to step in and offer much-needed support," said Kunal Arora, founder, SKVC Consulting, a firm that advises on labour law compliance.
EPFO 2.0 will take its time. What is needed immediately is a well-designed and fast website. 'The Income Tax Department and the Central Passport Organization outsourced their website creation to IT services firms, but EPFO has been ultra conservative in its approach and members are suffering," said Anurag Jain, co-founder/partner at ByTheBookLLP, a tax consulting firm also active in PF advisory to corporates.
However technical improvements alone will not address the knowledge gap—many employees simply do not understand the rules. And that's why the EPFO will continue to serve as a land of milk and honey for these startups.