Cash at your fingerprints

Using your credit card or mobile phone to withdraw cash or make payments will be passé in the not-so-distant future, when all you need will be your fingerprints.

The nationwide rollout and adoption of Aadhaar smart cards for identification purposes promises to be a game-changer and an equaliser in the financial services landscape of India, says electronic payment service provider Visa’s Group Country Manager for India and South Asia, Uttam Nayak.

Visa has tied up with the Unique Identification Authority of India (UIDAI) to develop a payments ecosystem atop the Aadhaar platform that will facilitate financial inclusion and boost the electronic payments culture in India.

“Aadhaar is a 12-digit number and it only helps to prove your identity. We went to them in 2010 and suggested linking it to a bank account,” says Nayak.

With Aadhaar utilising biometric fingerprint recognition to build a database on the nation’s citizens, Visa plans to utilise the same technology to facilitate payments.

“Eliminate the card and the phone and the Internet: use your finger. We are linking the Aadhaar number, your card number and your phone number to your finger. Your credentials are saved one time. The revolution is: more reach, with more access to payment, because the form factor is eliminated,” he says.

Visa has also assumed the role of a banking correspondent to ensure that all Aadhaar cardholders can open a bank account. Once an individual receives an Aadhaar, they are automatically ready to be issued a Visa Instant Account, simplifying the KYC criteria.

Prior to this, customers would have had to provide numerous documents to fulfil the banks’ KYC requirement.

E-KYC

“We will do what can be termed e-KYC (electronic Know-Your-Customer), which is paperless and instant opening of a bank account. We will pull your registration information from Aadhaar, your photograph, all the contact details that are required to open a bank account and convert it into an electronic form of the bank that is present at a specific kirana outlet.

And right there, we will take additional information, such as whether the customer needs a personal loan, or what his income level is, some additional level to support them better and push it into the bank system and instantly give you a Visa card,” says Nayak.

Massive reach

The Aadhaar project is unprecedented in its scope as the world’s largest financial inclusion and banking initiative, according to Nayak, who points out that more people have been enrolled under the scheme than the entire population of Brazil in the last two year.

“And they will wire up another 40 crore in the next 24 months, so it will be 600 million people. That is a great platform for inclusion and bringing transparency, efficiency and convenience into handling and managing their money,” he says.

The two biggest problems in the path of Aadhaar’s potential as a financial game-changer are the cost of opening the bank accounts and the dearth of money in these accounts.

But Nayak says the elimination of costs involved in verification of customers and documentation will amortise the costs incurred by banks on adoption and deployment of the Aadhaar technology over a period of time.

In this way, account opening costs will be nearly nil.

“On the problem of no money in the account, the Government plans to push Rs 3 lakh-crore, or $60 billion, into Aadhaar-linked accounts under various subsidy schemes, which means you have to go to the kirana store or ATM and register your biometric details to avail this.

Suddenly $60 billion comes into these accounts — that much money for the banks to use for their purposes. So the banking system becomes that much stronger, because money in cash form under the mattress does not add to the growth of the economy and growth of banks. And it does not provide safety and security for the consumer,” he says.

Check on misuse

Nayak says the system will not only eradicate concerns over money not reaching the intended beneficiaries, but in time, will be refined to ensure that it is not misused for purposes such as drinking. “Today, I don’t even know whether the money meant for you is coming to you or not. So the first problem of getting the money is solved. The next problem is ensuring that the money is used for what it is given,” he says.

“In the US, if money is given for food or medical benefits, you have to go to the store and buy medicine and the limit is only allowed to be utilised for medicines. If it is not expended, it goes back to the government,” says Nayak, hinting that segmentation of the cash subsidy provided to consumers under various schemes is in the pipeline, though, “This is not being done right now. Let the eco-system develop.”

He also acknowledges that duplicate accounts or benefits being claimed by ineligible cardholders could be a problem faced during the early days of the system. “But the thing about electronic payments is that it allows you to identify where the money is going and weed out such duplication… Aadhaar-linked bank accounts will pinpoint where the money has gone and who has got it and where it was en-cashed. A trail of money is there, so you will get caught. This trail is not destroyable, because it is in the bank system and auditable. This is a foolproof way of opening bank accounts, getting money to the consumers and tracking up to the last mile where cash has gone,” he points out.

Beyond government payments and subsidies, the potential of the Aadhaar system extends into areas such as banking services and retail. But Nayak stresses that onus for adoption of the system should not be left to the Government.

“Aadhaar is the enabler and equaliser — whether it is the richest or poorest India. We have created the ecosystem riding on the platform. Now it is for bank and companies. I wish corporate India would come up and say, I will put up ‘x’ number of terminals with a partner bank. I’m already talking to some of them, I hope someone will step forward,” says Nayak.

>arvind.jayaram@thehindu.co.in

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