Answered: What is the advantage of using Aadhaar linked e-KYC service in biometrics? Also, discuss how Aadhar can help in financial inclusion.

Aadhar is a 12-digit Unique Identification Number (UIN) which is a proof of identity. It is issued after collecting basic information, including biometric (fingerprint and retina) details of an individual.

Aadhar linked e-Know Your Customer (EKYC) has several advantages:

  1. It reduces compliance costs of services, by saving cumbersome paperwork and verification.
    2. It reduces transaction costs for various services.
    3. It makes the process easier, cheaper, and faster for customers, thereby facilitating greater access to services for semi-literate and illiterate people.
    4. It eliminates ghost beneficiaries and prevents leakages in government schemes, since each individual is provided a unique Aadhaar number.
    5. It makes tracking of beneficiaries and customers easier, helping improve service delivery.
    6. Big data analytics can further help improve delivery by analysing consumer behaviour and purchasing patterns.
    7. Also provides ease of interoperability, and various regulatory bodies such as RBI, SEBI, IRDA can now track activities of potential fraudsters and forward the information to SFIO and ED.

Aadhaar can be a potential game-changer for financial inclusion by –

  1. The use of Aadhaar Payments Bridge and Aadhaar Enabled Payment System, which will be used for government transactions and Direct Benefits Transfer.
    2. Along with Jan Dhan Yojana and Mobile (JAM Trinity), it will lead to a greater population becoming digitally and financially literate, boosting inclusion.
    3. Aadhaar Pay is integrated with Unified Payments Interface, providing a holistic digital payments ecosystem in the wake of recent demonetization and a push towards less-cash economy.
    4. UPI apps such as Bharat Interface for Money (BHIM) support Aadhaar authentication for transactions, literally making transactions possible with a “thumb impression”.
    5. Lesser compliance and transaction costs, which will enable financial institutions to provide more credit to the public.

Aadhaar is embroiled in a legal battle since there are concerns with it regarding violation of Right to Privacy. However, it recently received legislative backing with the passage of Aadhaar Act. With equal thrust to problem areas such as USSD-enabled mobile transactions and improving digital literacy as well as mobile penetration, Aadhaar can revolutionize the way transactions take place and government services are delivered within India.

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