India’s fintech firms fight against Aadhaar restrictions
Digital payments companies in India may collaborate with the finance and law ministries to lobby to be granted access to the Aadhaar biometric database.
This follows the recent decision by the Supreme Court to bar private companies from seeking Aadhaar data.
This is expected to damage the state of the digital payments industry, with fintech companies having business models in using the database for customer verification, says Vishwas Patel, chairman of Payments Council of India (PCI).
Aadhaar (meaning “foundation” in Hindi), is a 12-digit unique identity number obtainable by residents of India, based on their biometric and demographic data. This information is stored in the world’s largest biometric database, with the aim of recording the names, addresses, phone numbers, fingerprints, photographs, and iris scans of all 1.3 billion Indian residents.
The Aadhaar database will be used for e-KYC (know your customer) and e-signatures. This will affect lenders, mutual funds and insurances, as well as payment banks.
Some have called the Aadhaar use for verification purposes “unconstitutional”.
At the moment, only the government can use Aadhaar for various social welfare schemes.
“Going back to the traditional way of verification of customers is riskier than the Aadhaar-based one. It will lead to misplacement of physical copies of identity proofs of customers which is a greater threat to privacy,” adds Patel.
Various firms in India say this could increase the onboarding of customers to these services, as well as lower the costs of security processes.
If fintechs are not given access, some companies predict that credit and lending will be a much more difficult process, as well as more expensive.