RuPay cards to replace Aadhaar in welfare scheme authentication

NEW DELHI: The finance ministry has decided to limit Aadhaar's role in its welfare scheme payments and, instead, use ATM-enables RuPay cards for last-mile authentication to withdraw money.

While it will continue to use Aadhaar for opening accounts and to eliminate ghosts and duplicates from beneficiary rolls, the ministry has decided to give RuPay ATM cards with bank accounts being opened under to-be-announced financial inclusion drive, Sampoorn Vittiyea Samaveshan, government officials told ET.

"We do not want that an account holder should be restricted on a particular technology platform. By providing RuPay powered ATM card the account holder can transact on multiple platforms," a senior finance ministry official said on the condition of anonymity. This is a large blow to the Unique Identification Authority of India (UIDAI) which has, till now, regarded authentication services as one of its principal functions.

Government welfare payments were seen as one of the biggest potential revenue streams for Aadhaar. Vijay Madan, director general at UIDAI, did not respond to an ET email about the impacts of this development as of press time. Puneet Chopra, associate director at Lucknow-based financial inclusion think-tank Microsave, said, "Selection of RuPay card means authentication will be PIN based."

Several reports from field have said that online biometric authentication is not working for manual labourers and the old. UIDAI had notified handheld device specifications all business correspondents (BCs) need to follow. This was, however, opposed by BCs using different technologies such as smart card-based biometrics or no biometrics at all.

Abhishek Sinha, the founder of Eko, a mobile based banking provider, had told ET at that time: "Different villagers might be more comfortable authenticating their identity through a card, a phone, a fingerprint or a numeric code. The network should be able to accommodate all those options, and leave room for innovation."



With the latest development, Aadhaar will be used to identify bank accounts of beneficiaries, as both bank and government databases will be seeded with the Aadhaar number. However, once the cash flows into the Aadhaar-linked bank account, last-mile authentication when the money is being withdrawn will be done using the authentication systems of either the relevant bank or last-mile service provider such as BCs or a cellphone company.

MS Sriram, visiting faculty at IIM Bangalore's Centre for Public Policy, said it is a good idea to use Aadhaar only for seeding. "Linking bank accounts with Aadhaar number will help the government eliminate ghosts and duplicates from beneficiary lists," he said.

Also, rejigging India's existing ATM network to make it Aadhaar (and biometric) ready would be expensive, experts said. There is another reason why some banks want to retain authentication with them — UIDAI wants to charge for its authentication service.

"Cost of Aadhaar authentication is an issue, even if the cost is kept at just 25 paise per authentication," said Sanjay Kuberkar, founder of Adrenaline Financial Inclusion Advisors. "There is at least one client bank of mine who is considering to use their own biometric authentication method instead of Aadhaar because of the cost implications," he said.