In line with the Government’s initiative to foster a less-cash culture if not a completely cashless ecosystem, Prime Minister Narendra Modi has inaugurated one of the world’s largest biometric-authenticated payment system- Aadharpay on 14 April,2017.
Background
Post the de-legalizing of higher denominations as legal tender, the Indian market has been flocked by multiple digital payment and wallet applications which also included BHIM (Bharat Interface for Money) led by NPCI. However, peer-to-peer digital payment services had seen only a short-lived spike in user activity while the trend is seen reversing gradually as remonetization brings cash back to the economy and the digital inclusion has not been able to penetrate deep enough.
Bottlenecks in existing systems
The major bottleneck in existing payment is systems is the need for a digitally able and rather sophisticated user base. While most of India, majorly the rural segment, is yet far from adopting smartphones as the normal, low connectivity and infrastructural challenges are factors too significant to be ignored. Digital-financial inclusion continues to be a huge challenge given the breadth of the Indian population and resistance by the less literate and senior population. Also, linguistic challenges makes adds to the challenge of educating such a diverse set of population
Notably, an IAMAI-IMRB report says Urban India has close to 60% Internet penetration, reflecting a level of saturation, but there are a potential 750 million users in Rural India who are far from understanding digital systems and smartphones.
An ambitious venture
Amidst such reversion of trends, the government expects to increase participation in cashless transactions by introducing AadharPay. AadharPay solves the existing bottlenecks to a great extent by completely eliminating the need for user-awareness. While bypassing the need to educate a wide base of consumers, AadharPay would need to train a relatively limited set of merchants instead. Using AadharPay is literally as simple as placing a thumb-impression.
About AadharPay
AadharPay is essentially and Aadhar enabled payment system which uses biometric information like a fingerprint to authorize transactions. The AadharPay mechanism is expected to replace prevailing PoS machines and completely eliminates the need for carrying cash and mobiles altogether.
The mechanism requires merchants to register with AadharPay and connect their smartphone to a biometric finger-print scanner (available at prices as low as Rs.2,000). Once connected, a customer just needs to feed in a 12-digit Aadhar number and select from a list of bank accounts held (in case of more than one bank account linked) and simply authorize the transaction with a finger print scan.
Challenges
Privacy
Considering the absence of an overarching privacy law in India, there are limited means for participants to seek redressal in cases of privacy infringement or data-theft.
In global context, privacy and identity theft is not new. The United Kingdom, back in 2010, had declared doing away with its plan for a National Identity Register as it crossed with basic civil liberties. The French are at loggerheads to create a super-database of biometric information (like Aadhar) citing sophisticated terrorism as a major concern. Notably, the US government has assessed identity theft as the second most reported crime with volumes increasing by almost 47% year-over-year.
Data Leaks and Thefts
Currently the program has close to 600 banks, brokerages and government departments as registrants authorized to access Aadhar data. Meanwhile, many private companies obtaining and offering services based on Aadhar data have mushroomed all over the nation. This obviously increases the chances of data leak and theft so much that there have been various petitions and litigations against the program and its expansion on the grounds of privacy infringement and rights to identity protection.
Data Management & Security
While India is aggressively marching towards growth, it still has a long way to go in terms of development and infrastructure. With such a huge database, the responsibility of storing and transmitting data securely has become all the more essential. With a huge segment of the nation still struggling to find good internet connectivity, the idea of AadharPay penetrating throughout may be a far-fetched goal.
The way ahead for AadharPay
AadharPay can be expected to gain acceptability quite fast considering the elimination of 2%-4% service charges levied by common PoS terminals. The fact that one can pay without a card, mobile phone or even the hassles to manage multiple pin codes is quite fascinating as a thought and an indicator of thorough progress. However, the government must pay special attention to ensuring security, privacy and infrastructural convenience or else it might risk to have AadharPay as one of the largest reform efforts to collapse.
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