Laying a foundation

India’s audacious plan to bring mobile payments to the masses: pair them with a national ID card

October 7, 2013
Obsession
Digital Money
October 7, 2013

For three years now India has been rolling out a biometric national ID card called Aadhar, or “foundation”. It is an apt name. The plan is to issue one of these to every man, woman and child living in India, with the stated aim not of surveilling them (the cards are not mandatory) but for the purposes of improving record-keeping, decreasing corruption and ensuring that all Indians have access to government services. Debate rages over whether the scheme will fulfil its goals, become a white elephant, or lay the foundation for a dystopic bureaucracy, something India is all too good at.

Despite the criticism, Aadhar has formed a solid base. Some 440 million cards have already been issued—just over a third of Indians now have one.

Now the government is expanding its ambitions. Nandan Nilekani, a founder of Infosys and the man in charge of the Aadhar scheme, suggested last week that the platform the cards run on will be extended to include peer-to-peer money transfers. (If you’re in the US, imagine using your social security number to pay for a cup of coffee.) Nilekani has something similar in mind for Aadhar. According to Indian tech blog Medianama, this is what he said:

“If I take a cab, I can pay him by sending the payment to the bank account that is associated with the Aadhar number once we expand the authentication capabilities. Aadhar payments were initially just used for government programmes and then we opened it for oil companies and enterprises… We want to create a window for innovative companies.”

The biggest hassle with payments is information. No one really wants to hand the keys to her bank account over to everyone who asks. PayPal made its fortune by sitting between your bank account or credit card and those of the people you were paying. M-Pesa, Kenya’s famous mobile payment platform, did the same. And both also make the process simpler, by replacing several fields of identification with one: your email address in PayPal’s case and your phone number for M-Pesa.

The Aadhar card has a similar advantage. With services built on the platform it provides, third parties can allow people to send each other money or pay merchants using just a single number. Better still, you have already been authenticated when you got your card.

From the state’s point of view, it’s a great way to push non-cash payments and make online transactions easier. For an individual, it can however be terrifying. Such a system would make it easier than ever for governments to monitor flows of money.

In India, however, the biggest selling point of the cards is that they will reduce the scope for corrupt officials to skim off welfare payments. Since January this year, the government has started transferring payments directly into the accounts of beneficiaries using their ID numbers, cutting out middlemen and bureaucrats along the way. Of course some obstacles remain, chief among them this one inconvenient fact: some 40% of Indians don’t have a bank account.

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