Aadhaar Use in India and UIDAI

Indian companies cannot use Aadhaar data. Who can dominate the Indian identity authentication market?

Imagine that you are driving steadily on a hilly road. Suddenly a landslide is blocking the road ahead. You have to slam the brakes. The journey is suddenly interrupted. I don't know how to reach your destination. After the Supreme Court of India announced the Aadhaar judgment, the Indian fintech industry is in such a state.


The Supreme Court of India announced on September 26 that it banned private companies from accessing biometric databases. Because Aadhaar only earns a nominal fee and can remotely access rural markets and urban poor areas, the ban has caused a heavy blow to the banking industry and the wider financial services industry.


UIDAI and Adhaar

Indian Unique Identification Authority (UIDAI) Proposal

Since then, technology companies have been looking for viable alternatives. The Indian Unique Identification Authority (UIDAI) has proposed a new method that can manage Aadhaar and manage offline citizen registration.

According to the process, any entity accessing the Aadhaar number online must download a new QR code or XML format from the UIDAI website. This method can protect the security of citizen biometric data and protect the privacy of the 12-digit unique identification number.


However, the fintech industry is not interested in this option.


IDfy is a Mumbai technology startup that provides identity verification services. Its CEO Ashok Hariharan said, "The Aadhaar XML process includes many steps, including obtaining a one-time password (OTP), selecting a series of permissions, and downloading XML files. Used as an ID. The whole process is very complicated. If there are other options, most users will choose to use other IDs instead of Aadhaar. "


Mobile Numbers mismatch Aadhaar database

According to industry insiders, another problem is that the Internet bandwidth in remote locations is limited, and page jumps may occur during online process jumps. In addition, in many cases, the mobile phone number does not match the number in the Aadhaar database.


"Downloading XML files and new QR codes will be the last mile challenge because users need to complete OTP-based authentication before they can download files. If customers use different mobile phone services, identity authentication may fail." Fino Payments Bank products Head of Ashish Ahuja said.


Customer absorption

The biggest challenge facing fintech entities is to attract customers remotely. With Aadhaar, consumers don’t have to fill out a lot of paperwork, and they can access services through smartphones or computers even if they are far away.


"The biggest problem for us is that the client suddenly disappeared during the registration process, and Aadhaar solved this problem to a large extent," said a senior director of an anonymous fintech company in Bangalore that provides investment solutions. "Consumer The person can fill out the form in a few seconds, get the digital signature of the file through Aadhaar, and complete the identity verification through biometric technology. This process only accounts for a small part of the actual cost. "


Companies benefiting from this include digital loan companies such as Capital Float, Lendingkart, Early Salary, and investment startups such as Zerodha who want to be close to consumers digitally.


"If you have to manually collect the documents, the cost will increase greatly. In addition, it is very likely that the document is filled in incorrectly," said Nithin Kamath, CEO of Zerodha. "If a signature is missing, the agent must go a long way. Let the parties make up. "


Whether it is Kotak’s 811 plan or the National Bank of India’s concept of attracting a new generation of customers through YONO, it shows that banks also provide services to customers through digital means.


Deepak Sharma, Chief Digital Officer of Kotak Mahindra Bank, said, "We are working hard to digitize the process and further realize paperlessness at the branch. Now that only direct benefit transfer (DBT) customers can use Aadhaar data, we must create a seamless customer experience from scratch . "


In addition to fintech companies and traditional banks, the pressure on payment banks is not small. The state commissioned these entities to popularize digital payments to the masses.

For example, Fino Payments Bank relies on Aadhaar as the main body to provide services to migrant workers or customers from the rural poor. And now customers will absorb fees five times more than before, especially for manual collection of documents.


"The seamlessness of Aadhaar has greatly accelerated the account opening process. In addition, for our customer base, Aadhaar is easy to obtain. They have no way to provide other supporting documents." Ahuja from Fino Payments Bank said.


Recurring payment issues

Affected by mobile wallets and the unified payment interface (UPI), digital payments are becoming more and more common, but the regular payment process still requires manual intervention, including the payment of equivalent monthly installments (EMI) and system investment plans (SIP) for mutual funds.

The National Payment Corporation of India (NPCI) solves this problem through an electronic authorization system based on the National Automatic Clearing House (NACH) platform.


Consumers do not need to fill out a large number of documents, they can automatically debit their accounts using biometric databases by issuing electronic authorizations. NPCI said that due to court orders, it had to stop all eNACH authorizations last month and required all banks to move to online banking and debit card authorization.


PayU India operates the "Buy Now, Pay Later" product called LazyPay, and its general manager Jitendra Gupta stated that "eNach is the main mode of deduction from the customer's LazyPay loan account. It has now been terminated and the operation side is completely beaten Chaos. "


Gupta said that banks must manually verify customer signatures, greatly affecting turnaround time and cost efficiency. "The entire process takes 10-15 days, compared to only two seconds before. In addition, the cost of collecting NACH has increased dramatically, which seriously affects the user experience."


A senior banker said that if a customer initiates a process online, then assume that he or she can use online banking or debit cards as payment tools. The bank can solve this problem by enabling other modes of eNACH. "However, now that a lot of paperwork is required, the process becomes very troublesome."


Business uncertainty

These problems have adversely affected the business environment and damaged the confidence of entrepreneurs to carry out innovative business. Many businesses are built on Aadhaar. These businesses help poor people enjoy financial inclusion through Jan Dhan accounts, mobile phones and unique identification numbers. The Supreme Court's decision suddenly changed all this.


PayNearby claims to support more than 28% of Aadhaar bank payments, and its general manager Anand Kumar Bajaj said, "Enterprises have invested a lot of money to install dongle in retail stores to identify customer biometric technology data. And now all this is useless. "


The Reserve Bank of India requires payment companies to complete the complete "KYC" process. When the purse company issued a call for the high cost of KYC, the country told them to invest in the eKYC model to save costs.


An anonymous senior manager of a payment company said, "Now we do not have eKYC, and a few months later is the deadline for the conversion of a half-KYC wallet to a full KYC wallet. We don't know when the alternative method will take effect."


February 28 was the deadline for the conversion of the complete KYC wallet, otherwise it will be invalid

Many early-stage startups have also flourished through customer certification. Entities such as DigiO, Idfy and Khosla Labs have established themselves as intermediaries such as financial service providers Zerodha and PayU India.


"After Aadhaar's service was interrupted, revenue fell by more than 30%. We had to find alternative mechanisms to keep the business model running," said Ashf Hariharan of IDfy. "We also have a sub-authentication user agent (AUA) license, which is now invalid. . It is also a loss for us. "


However, Hariharan said that the business cannot be stagnant. As a technology company, IDfy uses video and machine learning capabilities to innovate and explore other ways to complete customer verification.


What should we do now?

Sharma from Kotak Mahindra Bank said, "We are looking for a reliable alternative mechanism, offline Aadhaar seems to be the second best solution. We are working with NPCI to develop other methods, such as through online banking or debit card authorization Complete the authorization as an alternative to eNACH. "


Kamath from Zerodha also said that the company has switched to video KYC and DigiLocker, and plans to switch to XML-based KYC and video to attract customers. He said that there may be a higher customer decline rate, but the company must bear it.


Another major problem facing the company is front-end employee training. In the past few years, with the digitization of processes, intermediaries and employees have learned to switch to tablets and smartphones to use eKYC, and now they must return to other forms such as paper or XML and video.


Fino Payments Bank relies on bank intermediaries to establish contact with people in remote rural areas. The bank ’s Ahuja said, "It took a lot of time to train employees to use eKYC. Now we must re-train in other modes, and the literacy rate of the last mile is always Is a challenge. "


Another trend for many startups is to move from online products to omnichannel products. Vivek Belgavi, financial technology leader of PricewaterhouseCoopers India, said, "Businesses are resuming acquisitions."


Banks can go back and change the direction of development, because they are mainly for the purpose of experimenting with technological products, but for early entities that may not be able to obtain investor support in many cases, the situation may be more difficult.


Large, well-funded technology companies such as Google, WhatsApp and Chinese companies have begun to enter the Indian fintech field, making the local technology startups difficult. In addition to competition from global players, the regulatory environment is constantly changing, and local companies have to fight on both fronts simultaneously.


As the founder of a digital loan startup said, you can sit back and regret the things you lost, or you can pick up stones, clear the road and move forward. The situation can't stop you from being annoyed, so Indian companies are actively looking for alternative business models.


JAM (Jan Dhan-Aadhaar-Mobile)

PricewaterhouseCoopers Belgavi said, "JAM (Jan Dhan-Aadhaar-Mobile) is only the first intervention, and the financial technology field needs more such intervention. All forces must be mobilized, whether it is policy, innovation or technology, to solve The issue of financial inclusion. "

India builds the world's largest biometric data system

    According to the Times of India, the Unique Identification Project (also known as the Aadhar Project) launched by the Unique Identification Authority of India (UIDAI) has completed the collection of biometric data for 820 million people. The project has become the world's largest biometric data project, covering 67% of India's population.

The data shows that the FBI's biometric database is 150 million fewer than India. In the future, more people in India will join the project, making it the number one database in the world for similar projects. As of April 20, India’s Uttar Pradesh had the largest number of participants, reaching 105 million, Maharashtra ’s 91.9 million, and West Mon State’s 61.2 million.

    Indian Oil Minister Dharmendra Pradhan said that the data is scientific and very practical, and the government plans to use it to guide the oil sector to formulate cooking gas subsidies (Cooking Gas Subsidies).

At the same time, the Indian government is collecting bank account numbers, biometric data and mobile phone numbers, and by combining these three aspects of information, more targeted subsidies are available.

Currently, more than 500 million people in India do not have official identification (ID), which has caused a series of problems:

  • Unable to obtain government assistance
  • Open bank accounts
  • Apply for loans
  • Obtain driver's licenses, etc.

The Indian government has specially arranged a subsidy of US $ 250 billion for its poor people, of which more than 40% have been embezzled by the people involved.

The Aadhar ID card has 12 digits, and the government can link bank accounts with specific people (especially the poor), and directly transfer related subsidies to their bank accounts. The data shows that ID cards are being issued at a rate of 20 million per month.

The Aadhar project will eliminate the middle link in the process of subsidizing the poor, and direct transfer can also curb corruption.

As of December 2014, the government has linked 100 million identification cards to bank accounts, and it is expected that the number of bank accounts will increase further in the future, and will bring more convenience to provide financial transfer payments to the poor.

In the future, binding biometric cards to mobile phone numbers will make the distribution of welfare subsidies more targeted.

    At the same time, some Indian think tank scholars and activists (such as the Centre for Internet & Society in Bangalore) expressed concerns about the privacy issues of the Aadhar project and even questioned the effectiveness of the entire project.

Former Intel engineer Srikanth Nadhamuni (Srikanth Nadhamuni) helped the Indian side develop the Aadhar technology platform in September 2010, and he is currently the head of Khosla Lab in Bangalore.

Nadhamni said that these data packets have been processed through 2048-bit encrypted storage. Once someone tries to access the data without authorization, they can all destroy themselves.

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