UID puts revenue stream on hold; authentication free till 2013

May 4, 2011 at 2:59 pm | Posted in The Market | Comments Off on UID puts revenue stream on hold; authentication free till 2013

http://www.livemint.com/2011/02/16010317/UID-puts-revenue-stream-on-hol.html?atype=tp

UID puts revenue stream on hold; authentication free till 2013

The offer will benefit service providers such as banks and telcos that need to verify customer details

Surabhi Agarwal, surabhi.a@livemint.com

Striking out an earlier plan to earn hundreds of crores of rupees from verification services, the Unique Identification Authority of India (UIDAI) has decided to initially offer its authentication platform free to service providers such as banks and telecom operators.

The authority, which is spearheading the ambitious project to give each resident individual a unique identity number under Aadhaar, had earlier projected a turnover of nearly Rs.300 crore a year, at Rs.5-10 per verification of details like address and biometric data.

“We have decided to not charge for verification from whoever…wishes to use the Aadhaar platform for authentication till December 2013, keeping in mind the public good,” said director general Ram Sewak Sharma.

“Aadhaar is not a commercial venture after all. It is the government of India’s social delivery project based on inclusive growth.”

Adopting the Aadhaar platform would offer significant operational and financial benefits to both government and private service providers, who need to verify details of their customers, spending Rs.100-500 or more per verification.

UIDAI is building an information technology (IT) infrastructure that will make it possible to authenticate individual as also biometric data online.

In a draft consultation paper in November 2009, UIDAI had said it would charge Rs.5 for every address verification and Rs.10 for every biometric authentication, while offering identify verification free.

The authority had identified banks, credit card, telecom, insurance and cooking gas companies as well as government agencies such as the passport office as potential users of the service. UIDAI estimated a revenue of Rs.288.15 crore through these authentication services, of whichRs.159.55 crore was to come through address verification alone.

“The foremost priority for UIDAI right now is to get people hooked on to using its applications and by making it free, it is just doing that,” said an analyst who is working on the project but did not want to be identified.

“While opening deposit accounts, banks roughly spend in the range of Rs.5-25 (on verification). But at the time of opening borrower accounts, banks spend more as they have to investigate in detail the credit worthiness of the borrower,” said B.R. Bhat, general manager, Corporation Bank. “The greater the loan amount, the higher is the amount spent on verification. The amount spent on verification in this case can go up to Rs.500.”

A UID number will cover the know-your-customer guidelines and help banks save verification costs, he added.

To verify details provided by customers, service providers often employ external agencies. These, in turn, either physically visit the potential customers to check their details or approach local police stations for the purpose. The process is cumbersome and yet, not fool-proof.

Once UIDAI has a critical mass of enrolments, service providers could instead send customer details to the authority either physically or electronically for confirmation.

UIDAI would then check these details with its central data repository and return a yes or a no—to ensure it does not part with any sensitive information on individuals.

Done electronically, the verification can be done in real time. UIDAI’s online authentication platform will be built using cloud technology—making the data accessible over the Internet. This will be covered by a managed service provider; the process for selecting one is under way. “I think it will be a game-changer for the telecom industry,” said Rajan S. Mathews, director general of the Cellular Operators Association of India. “The government has entrusted the industry with a lot of responsibility for adequate documentation and appropriate security clearances, which proves to be quite expensive for the telecom firms. In certain cases, the cost even goes up to Rs.1,000 per verification.”

Notifications from the finance ministry and the Telecom Regulatory Authority of India have already made it possible for people to use Aadhaar numbers to open bank accounts, for financial transactions, and for new telecom connections. Aadhaar plans to issue 600 million numbers by 2014 and has already enrolled more than one million people.

Remya Nair contributed to this story.