1 Billion on Aadhaar – Fintech India could be a model for financial inclusion


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It was a crazy idea. But what has happened in India is unique
– Nandan Nilekani

I started my journey on Daily Fintech discussing Micro Finance in India post the demonetization episode. In the past 12 months, the onboarding of consumers to Aadhaar in India has been a bewildering transformation. The possibilities for digital banking and payments are huge, and with Government backed schemes suitably supporting this infrastructure, India could turn from Data Poor to Data Rich – effectively driving financial inclusion.

Aadhaar is an ID card using biometrics, and it is significant to financial services as a method of authentication. Using the card and a fingerprint, it is possible to identify oneself accurately without the need for a paper trail. Aadhaar was designed by Nandan Nilekani and his team for the Indian Government with a vision to onboard the 1.25 Billion people to it.

Aadhaar has now been in the works for over 6 years, and in 2016 it crossed the 1 billion users mark. Aadhaar managed to hit the milestone in 5 years, where firms like FB took 7 years. This is the first government led initiative to have received such widespread adoption. The possibilities for digital banking through the Aadhaar initiative is immense, with transactions going digital.

A WhatsApp moment is now upon us in Indian banking.
– Nandan Nilekani

The demonetization process happened in India just about a year ago. The remonetization of the country that followed has been characterized by a move to digital. While it is clearly just a start, the uptake across the banking and the payments ecosystem in India for digitization has been huge.  According to Abhishek Pandit, a State Bank of India (SBI) business correspondent, they opened 6.1 million accounts between Nov 2016 and Oct 2017, and average balance of customers increased 80% from Rs 480 crore pre-demonetization to Rs 884 crores now.

As the twin forces of disintermediation and digitization accelerate the pace of change, the quick – banks able to perform – will not only survive but capture increasing market share, while the dead – banks unable to cope with the change – will get marginalized

– Credit Suisse

The digital drive is expected to add efficiency to various processes across banking and payments (and to not just these). A Reserve Bank of India statistics indicate that the total number of PoS machines in the country increased from 1,512,608 at the end of October 2016 to 2,224,977 at the end of February 2017.

The effects of digitization and the savings it provides is already clear. The new systems for monitoring transactions at fair price shops (FPS) are helping slash government’s food subsidy bill. A quarter of the ration card holders (used to identify subsidy beneficiaries) in the state of Haryana have not turned up for collecting the provisions since June 2017 when all 9,500 FPS in the state started using electronic point of sale (ePoS) machines.

Industry body ASSOCHAM notes that Aadhaar cards have resulted in Rs 83,184 crore reaching beneficiaries of the Direct Benefit Transfer (DBT) schemes, without the notorious leakages of the past.  This number is currently based on a few states that have completely implemented Aadhaar across benefit schemes.


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However, to maximise benefit of the Aadhaar revolution, there is still much to be done in rural parts of the country. PoS infrastructure not only needs to be improved with a cost effective solution, but also needs to be regionalised as only 10% of the population are conversant in English. While mobile networks and phones have penetrated well, smart phone adoption is still limited in rural areas.

However, the government has launched smart city initiatives by identifying 100 Tier 1 and Tier 2 cities. A subset of this list could be identified for complete digitization as a pilot, to be replicated across the rest.

Through schemes like GST and Demonetization, the Modi Government has improved the top line of the country’s economy, where as through Aadhaar it is doing wonders to the bottom line – bringing efficiency where it matters. And this could be a model that other emerging economies could use to drive financial inclusion.

Arunkumar Krishnakumar is a Fintech thought leader and an investor. 

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