India's Aadhaar Project

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With financial inclusion as one of the main application areas of Aadhaar, the Unique Identification Authority of India (UIDAI) has been working with various stakeholders, including the Reserve Bank of India (RBI), the National Payments Corporation of India (NPCI), and the Indian Banks' Association, as well as multiple IT giants to get ready for the launch. Two platforms have been established to facilitate e-payments:

Aadhaar Payments Bridge (APB): A system that facilitates seamless transfers of all welfare payments to an Aadhaar Enabled Bank Account (AEBA) beneficiary.

Aadhaar Enabled Payment System (AEPS): A system that leverages Aadhaar online authentication and enables AEBAs to be operated in "anytime-anywhere" banking mode by the marginalized and financially excluded segments of society through microATMs. Seven banks, including State Bank of India, ICICI Bank, Syndicate Bank, Union Bank of India, and the Central Bank of India have implemented the AEPS and seven more are to follow.

All of the data will be stored on a central server. The UIDAI is the regulatory authority which will manage the Central ID Repository (CIDR), including enrollment and authentication services, administration, analytics, reporting, fraud detection, a contact center, and a portal.

When it comes to government benefits, the APB will act as a storehouse of residents' Aadhaar numbers and their primary bank account number used to receive social security and entitlement payments. It handles the following aspects of the transaction:

• A government agency looking to make a payment provides an APB file containing details of the Aadhaar number, the reference number, and the amount to be paid to its bank (sponsor bank).
• The sponsor bank adds the bank IIN (Institute Identification Number provided by NPCI) to the APB file and uploads it to the NPCI server.
• NPCI processes the uploaded files, prepares beneficiary bank files, and generates a settlement file.
• The settlement file is posted to bank accounts with the RBI.
• The destination banks download the incoming files for credit processing after the settlement file has been processed.

The AEPS in turn allows financial transactions (credit, debit, remittances, balance inquiries, etc.) through microATMs in the following manner:

• A resident provides his/her Aadhaar number and fingerprint impression at the microATM device.
• Digitally-signed and encrypted data packets are transferred via Bank Switch to NPCI and UIDAI.
• UIDAI processes the authentication request and communicates the outcome in the form of Yes/No.
• If the authentication response is Yes, the bank carries out the required authorization process and advises the microATM.

If you think all of that sounds easy across multiple governments, regions, banks, and agencies, you are indeed an optimist. CIOs at financial and government institutions are scrambling to get ready as we speak. But there is a point to all of this. Not only is it a well-meaning attempt to get money into the hands of people who need it faster and more efficiently, but it should pay for itself.

Aadhaar will use a unique 12-digit identification number linked to demographic and biometric identification aimed at sanitizing existing databases of fraudulent/ghost/duplicate beneficiaries. According to a study by the National Institute of Public Finance and Policy, Aadhaar will yield a 52.85 percent internal rate of return, merely by plugging leaks.

Greeted with skepticism over what is dubbed as a politically-motivated pre-election announcement, Prime Minister Manmohan Singh is banking on the government's implementation skills to ensure that technology is used to the fullest for efficiency gains. Given the size of the project, that's a fairly big bet.