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Reengineering Aadhaar to enable secure financial inclusion

In July 2009, a piece of news article made me jump from my seat. Nandan Nilekani had left Infosys to join as the Chairman of the Unique Identification Authority of India on request from the then Prime Minster, Dr. Manmohan Singh.

This was one of the largest social experiment in the history of this planet- to map a billion Indians and provide them a unique identity. The problem statement that read then was that while many of us had passports, voter id card, ration card etc- but there was a large social strata at the bottom of the pyramid had no identification whatsoever, making it very difficult for them to comply to banking KYC norms or buying a SIM card for the phone.

 

aadhaar

Still remember listening to Nandan speak at one of the Nasscom conferences in 2010, he was trying to explain his vision for Aadhaar. He said, if you fire a query to the UIDAI database, asking us – this person here claims to be person X – is he person X?… and we will return a Yes or a No. That’s it. That’s Aadhaar simplified for you.

Fast Forward to 2017, the project has been a tremendous successful and we have more than 99% adults, which is more than a billion people mapped onto Aadhaar. However, in a country where justice takes decades, mapping more than a billion people in six years is nothing short of a miracle. Aadhaar is now flaunted as a panacea for everything- right from being a replacement for the PAN card to being India’s answer to the US’s Social Security number.

Aadhaar fits in perfectly for opening a bank account for someone without an ID proof. With the new small finance banks and payment banks opening their doors for business shortly, they are a relieved lot, since there will be less issues for onboarding their customers. Reliance Jio onboarded 100 million customers on the back of Aadhaar, which would have been impossible without the Aadhaar framework and platform. With Aadhaar-pay around the corner as well, paying someone having this unique number, will be as easy as sending a text message.

However, there are a few shortcomings on Aadhaar that do not escape our worries: –

  1. Aadhaar was a unique ID project to give an identification to those who didn’t have any. Providing address proof was optional. Hence in many cases, its being accepted as address proof as well. This is an anomaly and should be rectified at the earliest.
  2. There needs to be mass education campaign on data privacy of Aadhaar- very similar to educating people of dangers of sharing ATM PIN numbers or debit card/ credit card numbers. Awareness of identity theft is still low in India and smart criminals know the loopholes and how to get away with exploiting them. Just like Europe, we should have a strict privacy law here as well.
  3. People still don’t know how to update their Aadhaar biometrics. their photograph for example. How can one know when it is time to update his data? UIDAI should publish guidelines or inform people that their biometrics need to be refreshed. Also for recording death- UIDAI should be informed by life insurance agencies or banks when a person passes away?
  4. Security at the Aadhaar enrolment ecosystem should be audited regularly. It may be secure today, but hackers are getting intelligent every day. Banks should have stations for a person to cross verify the iris and fingerprint details. We know the issues with huge government databases- the voters register for example. During an election, its easy for thousands of records to go missing or the photograph on the electoral roll to be replaced. It’s because the same operators who are enrolling the voters are also enrolling on the Aadhaar database.
  5. What if the authentication fails- what we call as a false negative. The onus of getting the data rectified is not with UIDAI but with the individual himself. While mobile OTP can be used as a fall-back option, what if you registered a wrong mobile number in the first place. The Aadhaar station at the banks can be a solution to overcome this problem.
  6. Aadhaar is a unique number, not a unique document. A passport or driving licence is a unique document. In case one loses his Aadhaar card, one can simply go to the UIDAI website and download a copy. A black and white copy may not be accepted as id proof. However, if you chose to print in colour and possibly laminate it- you can get away with calling it as an ID proof. Banks should authenticate on the number rather than the document. During demonetisation, the bank transactions were done based on the document rather than the number.

When this program was designed, no one would have visualised the utility of this number. While there are issues, these will get sorted over a period of time- with this little number having filled a long pending need.

There is no doubt that Aadhaar can become the perfect accelerator in firing up India’s financial inclusion and banking success story

pratipAuthored by Pratip Banerji- Sr. VP  and Country Manager, FIS. The article first appeared in Banking Frontiers April 2017

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