The foundation of India’s new digital payments platform

RBI Governor Raghuram Rajan At The Launch Of Unified Payments Interface

Reserve Bank of India Governor Raghuram Rajan, Nandan Nilekani and Managing Director and Chief Executive Officer of ICICI Bank Chanda Kochhar during the launch of Unified Payments Interface on April 11, 2016 in Mumbai, India. (Photo by Kunal Patil/Hindustan Times via Getty Images)

India’s government launched its “Unified Payment Interface” in April to bring basic financial services to Indian citizens using mobile-wireless technology. This would not have been possible without Aadhaar.

India’s biometric ID programme began in September 2010. Named Aadhaar after the Hindi word for foundation, it has since given a unique ID to over a billion Indians, providing the basis for inclusion in the formal financial system.

ID’s role in financial inclusion

India’s Aadhaar programme is considered the world’s largest national ID project, and all of India’s 1.25 billion people will have a unique ID before the close of 2016. It has created a system of unique IDs that functions as a building block to financial inclusion, as well as an enabler to the pursuit of development goals across a wide variety of industry sectors.

Speaking at the ITU Workshop on “Digital Financial Services and Financial Inclusion” in December 2015, the Chairman of the Telecom Regulatory Authority of India, Ram Sewak Sharma, highlighted that India was seeing 4 million Aadhaar-enabled authentications each day, taking 2 seconds for authentication.

The key ingredient to Aadhaar’s success has been the program’s focus on identity. An Aadhaar ID is a unique 12-digit number derived from a person’s iris, fingerprint or facial features. The ID is based solely on the natural attributes necessary to ID, and nothing more.

Achieving the SDGs through IDs

ID’s role as a foundation for inclusion is a target of the UN Sustainable Development Goals (SDGs), and research from the Center for Global Development found that 10 SDGs will require an enabling foundation of coherent ID programs. 2 billion people still do not have a unique ID, but too many IDs or an incoherent system of IDs is a challenge just as great as the lack of ID.

Speaking at the same ITU event in December 2015, Alan Gelb of the Center for Global Development, highlighted voter ID programs as an area of particular concern, noting that these programs – despite being carried out at great expense – often have the effect of increasing the incoherence of national ID systems.

ID is often tied to status – a driver’s license is an ID tied to a person’s eligibility to drive legally; a voter ID is tied to a citizen’s eligibility to vote; a national ID card is tied to citizenship, and so on. In rolling-out Aadhaar, Indian legislators called for a separation of identity and status, opening access to the Aadhaar ID system to service providers in all markets. This focus on ID has effectively led to Aadhaar becoming an ID ‘plug-in’ to a wide range of other services.

Bundling ID with status, such as eligibility to vote, greatly restricts the portability of ID and thus its value as a foundation for inclusion in formal systems. The separation of ID and status gives rise to opportunities for a variety of systems of eligibility to build on the foundation provided by a system of unique IDs, with Aadhaar providing the leading example.

The ITU Focus Group on Digital Financial Services is studying Aadhaar ID as an example of the merits of biometric ID programs in expanding financial inclusion.

The Focus Group’s goal is to develop guidelines, principles and toolkits based on international best practices, which will be adapted and implemented by countries looking to capitalize on digital and mobile technologies in their efforts to increase access to basic financial services for people that today remain at the margin of society.

Vijay Mauree

vijaypassphotoVijay Mauree joined ITU in 2010 where he is responsible for coordinating the work of the ITU Focus Group on Digital Financial Services, assistance to developing countries in establishing national standardization secretariats and the development of e-learning courses on technical standardization.
He has published four ITU Technology Watch reports on Mobile Money, ICT as an enabler for Smart Water Management, the Optical World, and Privacy in the Cloud.

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