Aadhaar Addenda

A few years ago, we discussed the value of well-designed national ID systems – particularly those with biometric features and strong privacy protections. At the time, the fate of India’s Aadhaar system seemed uncertain. Conceived during a previous administration, it was unclear whether Narendra Modi’s government would get behind the initiative, and less assured that the government would have the capacity to execute the planned rollout.

Now, things are a little different. A recent case study by GSMA claimed that 94% of the Indian population (1.1 billion people) is now enrolled in Aadhaar. The system has become a critical tool in a country with low literacy, no social security numbers, and incomplete birth registries. It is currently used for a wide range of government programs, including food and agricultural subsidies, voting, and tax collection. The Economist notes that identities are being verified through fingerprints and iris scans around twenty million times a day. And Aadhaar is not just for government services. People can opt to allow private businesses to confirm their identity, which opens a massive market to financial institutions, private schools and hospitals, retailers, and mobile operators. According to the GSMA case study, “Aadhaar-enabled e-KYC platform reduces the cost of the Know-Your-Customer (KYC) process for operators from Rs 40 ($0.60) per customer to Rs 5 ($0.07), significantly lowering the overall cost of customer acquisition.” For the national government, as well, the economic argument is compelling. India spent $1 billion to implement Aadhaar, or roughly $1 per person, but the government estimates it has already saved $8 billion in fraudulent subsidy payments in just two years.

To be sure, the implementation and expansion of Aadhaar has had some glitches. Critics point out that privacy protections in India are weak, and the Unique Identification Authority of India (Aadhaar’s implementing agency) has had to create data security policies in an environment of weak controls and low awareness. There are also practical problems using the system in a country with electricity and Internet access issues. The development community may have a role to play in mitigating these problems in India. Though more likely, development organizations will have more success quantifying Aadhaar’s impact and helping other countries design and implement their own national ID systems. The linkage between these systems and vital health and financial services will be the measure of success. This will certainly be something to watch as it will provide lessons and have implications for other national ID systems going forward.

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