Aadhaar and digital payments : The power in those 12 digits

Tagged as world’s largest national identification project, Aadhaar is a 12- digit unique identity number issued to an Indian resident on the basis of their biometric and demographic data. The unique Aadhaar number has proved its utility in eliminating fake and duplicate identities which has reduced leakages in many of the Government schemes such as MGNREGS, PDS, etc.

Although Aadhaar neither provides citizenship identification nor guarantees any rights, it is largely seen as a facilitator of various Government subsidies and other targeted delivery of services. The Parliament of India last year passed The Aadhaar bill (Targeted Delivery of Financial and other subsidies, Benefits, and Services) which intends to provide for targeted delivery of subsidies and services to individuals residing in India by assigning them unique identity numbers, called Aadhaar Numbers. The bill provided the legal backing to Aadhaar which was pending from 2010.

Aadhaar Number can be used for verification of identity of a person receiving subsidies or Government services. Any public or private entity can accept the Aadhaar number as a proof of identity of Aadhaar number holder. This step has revolutionized the digital services world too. For instance, one just needs his Aadhaar number to procure a mobile SIM card instead of all the paper work. Many new innovations are coming up in the digital world to proactively use Aadhaar number in an integrated and holistic way.

Till date, 111 crore of total 127 crore Indian population have registered for Aadhaar number which is big success of the Aadhaar program. Post Demonetization, the significance of digital payments is on rise and even the Government launched its own BHIM (Bharat Interface for Money) App which is Aadhaar based app to simplify digital payments. The App would connect to Aadhaar linked bank accounts. Other Aadhaar payment apps have been also introduced by likes of IDFC bank. This will make the payment infrastructure more robust, safe and secure.

The recently introduced AEPS (Aadhaar Enabled Payment System) uses Aadhaar data for the authentication and neither requires your signature nor Debit card. Aadhaar authentication works through fingerprint matching and is highly secure. The beneficiaries of AEPS will be mostly from rural India who will have access to financial services at affordable rates.

In this year’s budget 2017-18 the Government made announcements about Aadhaar Pay. It is a merchant version of Aadhaar Enabled Payment System (AEPS). In the words of Finance Minister, “This will be specifically beneficial for those who do not have debit cards, mobile wallets and mobile phones.” The government has set a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhaar Pay, IMPS and debit cards.

The Income Tax department is also working on a project to issue PAN to assesses within minutes by way of e-KYC authentication using Aadhaar, a move that will help bring more people under the tax net by making it easier for people to get Permanent Account Numbers.

Therefore, 12 digits of Aadhaar are going to change the way India is going to transact in near future, especially when 87% population has their Aadhaar numbers. This holds more relevance to rural India where digital infrastructure is just coming up in big way and they will be empowered for financial transaction through usage of their Aadhaar numbers.


Abhishek Ranjan is a Research and Policy Analyst to Members of Parliament (MPs) Mr. Ninong Ering and Mr. Dilip Tirkey. He is also working as a Consultant to University of Chicago’s Delhi Center for Anubhav Lecture Series, and is a Policy Consultant for FinTech startup Credy. Earlier, he was a LAMP Fellow and graduated in Engineering from Manipal Institute of Technology.

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