UID and Financial Inclusion UID Authority of India

UID and Financial Inclusion UID Authority of India www. uidai. gov. in

Features of UID-based financial inclusion • Secure way to access bank account with UID auth • UID KYR is sufficient KYC for no-frills accounts • Bank account for every resident UID Auth Bank account KYR = KYC Rs. 100 incentive • Rs. 100 incentive for BPL residents (13 th FC) 2

Ram’s efforts to collect his NREGA dues 2: 30 pm deadline 2 hour wait at the bank and a frustrated bank clerk The return journey 14 km bus journey 6 km walk to bus stop Ram’s Thursday ordeal Moneylender dues @ 5% pm Ration from village kirana with remaining money 3

Ram’s trade-off for his wages Rs 10 Transport Rs 25 Interest cost Rs 91 Opportunity cost of wasted day Rs 546 Rs Zero ‘Processing fee’ Rs 126 Total cost > 20% of income 4

The cost to the poor of ‘last mile’ financial distance Central Schemes NREGA Sarva Shiksha Abhiyaan (SSA) JSY + ASHA Indira Awaas Yojana Estimated spend ( Rs crores)* @ 10% cost, > 6, 000 crs National Old Age + widow + disability pensions 37, 779 11, 934 1, 400 8, 795 4, 000 Total across above schemes 63, 908 Food, Fertilizer and Fuel subsidy 95, 579 5

Deposit cash at Micro. ATM Deposit Rs. 50 Ram UID, Fingerprint, Amount Ram hands cash to BC BC with a micro. ATM Ram credit, BC debit Beginning Balance Beginning Cash Ending Balance Ending Cash Ram Rs. 100 Rs. 50 Rs. 150 Rs. 0 BC Rs. 1, 000 Rs. 950 Rs. 1, 050 Confirmation receipt, SMS Receipt

Withdraw cash at Micro. ATM Withdraw Rs. 50 Ram UID, Fingerprint, Amount Ram receives cash from BC BC with a micro. ATM Ram debit, BC credit Beginning Balance Beginning Cash Ending Balance Ending Cash Ram Rs. 100 Rs. 50 BC Rs. 1, 000 Rs. 1, 050 Rs. 950 Confirmation receipt, SMS Receipt

NREGA wages: UID enabled direct transfer Transfer money From NREGA a/c To UID 2653 8564 4663 Amount Rs 546 Block NREGA Central switch at NPCI PIA bank a/c Authentiction GP NREGA Debit NREGA a/c Credit Ram’s a/c Resident - Ram UID 2563 8564 4663 Info Muster roll with Ram’s UID IVRS/ SMS UID enabled Resident no -frills bank a/c – existing or new 8

Convenient cash withdrawal Authentication Resident - Ram UID 2563 8564 4663 8. Info- IVRS/ SMS 6. Debit 4. Authenticate and execute Ram’s bank a/c NPCI switch 1. Withdrawal request 9. Cash 7. Credit 3. NPCI request Transfer. Money From UID 2653 8564 4663 To UID 7233 5968 3094 Amount 300 2. Money transfer instruction + biometrics BC’s bank a/c BC (Kirana, SHG, PO etc)) With Micro-ATM 9 UID: 7233 5968 3094

Common technology infrastructure across customer service points Innovations from the lower end can migrate to the higher end. Example: cash transfers Bank branches 70, 000 today 85, 000 by 2013 ATMs 45, 000 today 100, 000 by 2013 POS terminals 500, 000 today 1, 000 by 2013 Innovations from the higher end can migrate to the lower end. Example: railway tickets Micro. ATMs 1, 500, 000 by 2013 Mobile, internet, phone banking Any where, any time access Technology can be used to drive inclusion Solutions lower in the pyramid are more inclusive 10

Multiple smartcards High cost, high complexity, low flexibilty Backend Assisted/Device Resident AADHAAR infra NREGA Pensions Ram NOAPS IAY RSBY Confusing array of cards and A/Cs • Expensive and Duplicate H/W, S/W & Infrastructure for Govt. • Duplicate records and lack of integrated MIS and monitoring

Online “virtual card” + mobile self service Least cost, reduced complexity, high flexibility Backend Assisted/Device Resident AADHAR linked backend authentication system Ram PDS NREGA RSBY Common Online AADHAR application infrastructure Authentication & application • Unified Identity verification via AADHAR • Unified backend via AADHAR • Applications Residing entirely at the backend/on the cloud • Unified Access via connected terminal and/or mobile • Device only authenticates, therefore much cheaper, simple • No Smart Card • AADHAR Linked Bank Account • AADHAR Linked Mobile Phone Increased Access via Mobile Self Service Enhanced flexibility and empowerment to residents Reduced Cost and Complexity

Aadhaar enabled Offline vs Online solution Issues Offline Online Addresses duplicate records Information Resides in “smartcard” Resides in “smart cloud” Business application Resides in the device Resides online in the backend cloud Device Complex, expensive Simple, inexpensive Interoperable Multi-modal Can work without connectivity Real-time

Financial Sector • Banking – Lower KYC costs – Low transaction costs – Increased reach, new revenue models • Insurance – Micro-insurance – Fraud prevention for life insurance • Securities – Reliable and low cost KYC – Micro-Gold ETFs – Micro – Money Market Mutual Funds www. uidai. gov. in

Thank You 15