#1 ABSTRACT

All over the world we have been hearing news on how the National ID issued would be used to carry out payment transactions. Some of the recent pilots or announcements wherein National ID serves as payment instrument too are Nigeria and UAE. They aim for National and Individual security, simplification of transactions, enablement of innovative e-services and overall institutional service.

This whitepaper introduces about the National ID program and its benefits, later it talks about the approach taken by the various nations to roll out this program whose salient feature has been to envisage on using the national ID as a payment instrument. Then we will discuss about the advantages, issues and concerns specific to this program.Finally we will shift focus onto Aadhaar in India, benefits of using Aadhaar as a Payment instrument and various suggested approaches to implement it.

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#2INTRODUCTIONNATIONAL ID PROGRAM

Governments of many countries have issued national identification number used for tracking their citizens, permanent residents and temporary residents for the purposes of work, taxation, government benefits, health care and other functions. Even though different countries have various views on the treatment of the national identity, a large number of countries have been in favour of having a national identification system in place. Various countries have issued numbers to the end users presumably for a particular purpose, it may be either for Social benefits disbursements, identity, and Financial Inclusion etc. and over time, they have become a de facto national identification number and have been used for various purposes as given below.

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National

IDProgram

Identity Health Benefits

Information |Status ofEducation

Banking andFinancial Services

Tax

DrivingLicense

G2CIniciatives

Employmenttand Business

Opportunities

01 02

0309

0408

0507

06

Old AgeBenefits |Pension

$

#3NATIONAL ID PROGRAM ECOSYSTEM/APPROACH

3.1 National ID card (Smart Card for payment transactions) – System Components

A smart card is a simple plastic card that is at the size of a credit/debit card, with embedded microchip, which has the constituent parts for transmitting, storing and processing data. The data stored in a smart card are protected from unauthorized access and manipulations because data access is only via a serial

interface controlled by security logic. Hence confidential data can be written to and stored in the card in a manner that prevents them from unauthorized access. Smart cards are classified differently due to their functionality and their communication with the reader. They are classified as contact smart cards and contactless smart cards.

Contact smart cards: Smart cards that have contact pads at one corner are known as contact smart cards. These contact pads help to supply the necessary energy and to communicate with the reader via direct contact.

Contactless smart cards: Smart cards that do not have contact pad on their surface are known as contactless smart cards. Hence the connection between the card and the reader is achieved via radio frequency (RF). They have embedded small wire loop that is used as an inductor to supply energy to the card and communicate with the reader.

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Hardware + Software

OS & App Software

+

+

Software Data

Personal Data

Sample National ID card

Name

Address

Date of Birth

Chip Card Atenna

Chip Module with Antennaat the rear side of the module

Radio Communicationbetween chip card atennaand chip module atenna

- Dual Interface Module- Contactless & Contact Module

Iris Scan |Finger Print(Optional)

Facial ImageSecure Microcontroller IC

3.1 National ID card (Smart Card for payment transactions) – System Components

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National Card for Payment Transactions

Approach 1 Approach 2

Approach 1 Approach 2

Issuance of National ID Card (Smart

Card) which supports payment

transactions.

Enrolment Program initiated (mostly mandated) by Government Institution

Issuance of National ID (payment) Smart Card.

Association of Government Agency with Network Infrastructure providers and with various banks for linking National ID to the Bank Account.

End users will be in a position to use the National ID card for payment transactions.

Card issued will be linked to bank account/(s). End users can have an account selectable option during a payment transaction.

Apart from banking, National ID Card will be bundled with features/applications like insurance, pension, tax, driving license, health etc.

Enrolment Program initiated by Government Institution.

Issuance of National Identification Number.

End User has to link Bank Account/s to National ID for payment transactions.

Various Entities (Banks, Insurance companies etc.) in association with concerned Government agencies can issue National ID program branded cards (Smart cards – can be used as payment instrument) to its customers.

Government Agency in association with Network Infrastructure provider and various banks for linking National ID to Bank Account can issue a card with National ID as its number (Smart cards – can be used as payment instrument). This can lead to step 5 and 6 as mentioned in Approach 1

Usage of National ID Card (Number) as

a payment card instrument.

01

02

01

02

3.1

3.2

3.3

03

04

05

06

Detailed Process flows followed in two approaches

Snapshot of National ID Program – Nigeria

In Nigeria Government Agency has collaborated with MasterCard to issue National ID smart card which provides benefits of secured electronic payments.

a - Payment Applet has been loaded onto the National ID card – includes chip and pin issuance. Acts a pre-paid card which can be loaded online and cash can be withdrawn on MasterCard certified ATMs/POS globally.b - Biometric access has been enabled using match on card along with PIN and chip for the payment solution on the National ID card.c - National ID card is bundled with 13 other applets including one for payment. Those applications provide following benefits among few – Health, pension, immigration, insurance etc.

Snapshot of National ID Program – UAE

a - They aim for national and individual security, simplification of payment transactions, facilitation of innovative e-services and overall organizational service.b - Government Agency has collaborated with Network International to make National ID smart card work as a payment instrument and ensures fool-proof cardholder authentication that includes the user’s biometric details.c - National ID card is bundled with various applications catering to different sectors apart from Banking & Financial like – Health, insurance, Government, Education etc.

As per the mentioned table of approaches, National ID program can either lead to following logical endpoints.

National

IDProgram

ENDPOINTS

Approach 1

Approach 2

Step 3.3

Approach 2

Step 3.2

Approach 2

Step 3.1

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#4ADVANTAGES OF THIS PROGRAM

A

B

C

D

E

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Reduction in cost of governance via the integration of various silo

government databases

Facilitation of common identity needs of the government and the private

sector

Enhancement of government service delivery by integrating and streamlining

government databases

Reduced risk of fraudulent usage of payment card instrument.

Enablement of various multiple value added services and contribution to the

overall growth of the nation’s economy

Advantages/ Benefits across various sectors to respective stakeholders are :

Stakeholders Advantages/Benefits

Secured Exchange of Data/File

Secured Access to Networks and ApplicationsConfidentiality, integrity and non-repudiation of transactions

Secured TransactionsAccess to a full range of financial services for the under bankedCustomers

Internal Employees

Government Agencies / Banks

Bankling and Financial Sector$

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CitizensBetter e-governance (online)Benefits and Subsides

Secured Exchange of Data/File

Secured Access to Networks and ApplicationsConfidentiality, integrity and non-repudiation of transactions

Secured TransactionsGovernment Agencies

Internal Employees

Businesses

Government Sector

Teaching StaffAccess to e-learning portalsExaminations and Results

Registrations and ScholarshipsAccess to e-learning Portals

Secured exchange of data/fileOnline applications for grants etc.

Secured Access to Networks and ApplicationsConfidentiality, integrity and non-repudiation of transactions

Students

Internal Employees

Government Agencies

Education Sector

Citizens / EntitiesOnline ClaimsPolicy Applications

Online Policy Delivery

Secured Access to Networks and Applications

Confidentiality, integrity and non-repudiation of transactions

Secured Exchange of Data/FileGovernment

Internal Staff

Insurance Agents

Insurance Sector

#5ISSUES AND CONCERNS - REMEDIES

i - Privacy Risks & Security (data) Issues: Security vulnerabilities has been the major issue of the National ID program which can lead to privacy risks as it gets really difficult to separate privacy and security issues while implementing a technical system that is designed for maximum information sharing. Such risks can be muted by developing strong security infrastructures that incorporates privacy enhancing technologies (PETs). With strong security and PETs it can ensure technical systems adhere to privacy laws of the state.

ii - Huge Investments – burden to tax payers and cost to employers: A full blown National ID program involvesheavy government spending and implementation should cross-over

bureaucracy hurdles, it can lead to undue delays which will affect the cost even further. There is a need to have strong political will and less of policy myopia to overcome this.

iii - Error rates – Secondary research explicitly confirms that any state’s computer registry will be filled with large amounts of faulty data that will render the system unreliable. Even the best government databases have error rates in the range of 10- 30 percent. There is a need to build an efficient enrollment team which helps in reducing operational errors/issues and eventually works on effective gathering of citizen’s data.

iv - National Security – A Benefit or a hindrance? – National ID should supposedly lead to National security but there have been cases across various Nations wherein illegal migrants have been issued National ID number which is a serious threat to National security. Government Institution heading the program must do thorough check of the antecedents of the companies before enlisting them to collect biometric data.

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Citizens

Secured Access to Networks and ApplicationsConfidentiality, integrity and non-repudiation of transactions Internal Staff

Government Agencies

Doctors/Nurses

Health Sector

Secured exchange of data/fileMedical benefits status and monitoring

Registrations and Health RecordsHealth Benefits and Subsides

Access to patient databases and medical research portalsIssuances of medical certificates

#6AADHAAR IN INDIA WAY FORWARD

Aadhaar in India is currently at Approach 2- Step 3.1 stage as mentioned in “Table 1 - Detailed process flows followed in two approaches” and “Figure – 4: National ID for Payment Transactions – Approach Snapshot”. As per the same table/figure it can either move forward to Approach 2 – Step 3.2 or Step 3.3 or stay put on Step 3.1.

As per Approach 2 – Step 3.1, Government body – UIDAI has been involved in issuing National ID (Aadhaar card) number (Aadhaar number) to its citizens. Citizens have to link the Aadhaar number to their bank account/s for payment transactions.Meanwhile there has been discussions going on related to issuance of smart card (Approach 2 – Step 3.3) with Aadhaar as its number which can lead to multiple benefits as quoted in Approach 1 – Step 5 and 6. There is also wide scope for various entities like banks to initiate the issuance of Aadhaar branded smart cards in association with concerned Government agencies to its customers (as illustrated in Approach 2 – Step 3.2).

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http://www.bth.se/fou/cuppsats.nsf/all/80900dd88df5f25ac125770e00735f81/$file/Ths7.pdf

https://www.stmarytx.edu/webfiles/ctl/pdf/Identity_Card.pdf

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ihttp://ijcit.com/archives/volume2/issue6/Paper020619.pdf

http://www.nimc.gov.ng/sites/default/files/resources/newsletter_no6.pdfvi.http://www.ictd-asp.org/wp-content/uploads/2014/04/April_DuBois_Presentation_FINAL1.pdf

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http://jeteas.scholarlinkresearch.org/articles/Identity%20Management%20new.pdf

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http://www.insead.edu/facultyresearch/centres/innovation_policy_initiative/events/documents/National_ID.pdf

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http://www.skoch.in/images/Stories/Governance_knowledge/UID%20_%20Challenges,%20Applicability%20and%20opportunity.pdf

#7REFERENCES

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