UID and Financial Inclusion

UID Authority of India

www.uidai.gov.in

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Features of UID-based financial inclusion

• Rs. 100 incentive for BPL residents (13th FC)

• UID KYR is sufficient KYC for no-frills accounts

• Bank account for every resident

• Secure way to access bank account with UID auth

UID Auth Bank account

Rs. 100 incentive

KYR = KYC

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Ram’s efforts to collect his NREGA dues

6 km walk to bus stop

Ram’s Thursday ordeal

14 km bus journey

2 hour wait at the bank and a frustrated bank clerk

2:30pm deadline

The return journey

Moneylender dues @ 5% pm

Ration from village kirana with remaining money

Ram’s trade-off for his wages

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Rs 546

Rs 10 Transport

Rs 25 Interest cost

Rs 91 Opportunity cost of wasted day

Rs 126 Total cost> 20% of income

Rs 546

Rs Zero ‘Processing fee’

The cost to the poor of ‘last mile’ financial distance

Central Schemes Estimated spend ( Rs crores)*

NREGA 37,779Sarva Shiksha Abhiyaan (SSA) 11,934JSY + ASHA 1,400Indira Awaas Yojana 8,795National Old Age + widow + disability pensions 4,000Total across above schemes 63,908

Food, Fertilizer and Fuel subsidy 95,579

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@ 10% cost,

> 6,000crs

UID, Fingerprint,

Amount

Ram hands cash to BC

Ram credit, BC debit

Confirmation receipt, SMS

Beginning Balance

BeginningCash

EndingBalance

EndingCash

Ram Rs.100 Rs.50 Rs.150 Rs.0

BC Rs.1,000 Rs.1,000 Rs.950 Rs.1,050

Deposit cash at MicroATMRam BC with a microATMDeposit Rs.50

Receipt

UID, Fingerprint,

Amount

Ram receives cash from BC

Ram debit, BC credit

Confirmation receipt, SMS

Beginning Balance

BeginningCash

EndingBalance

EndingCash

Ram Rs.100 Rs.0 Rs.50 Rs.50

BC Rs.1,000 Rs.1,000 Rs.1,050 Rs.950

Withdraw cash at MicroATMRam BC with a microATMWithdraw Rs.50

Receipt

NREGA wages: UID enabled direct transfer

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Muster roll with Ram’s UID

GP NREGA

Block NREGA

PIA bank a/c

UID enabledResident no -frills bank a/c – existing or new

Central switch at NPCI

Authentiction

Resident - RamUID 2563 8564 4663

Transfer money From NREGA a/cTo UID 2653 8564 4663Amount Rs546

Debit NREGA a/cCredit Ram’s a/c

Info

IVRS/ SMS

4. Authenticate and execute

2. Money transfer instruction + biometrics

Convenient cash withdrawal

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Resident - RamUID 2563 8564 4663

BC (Kirana, SHG, PO etc))With Micro-ATMUID: 7233 5968 3094

TransferMoneyFrom UID 2653 8564 4663To UID 7233 5968 3094Amount 300

Ram’s bank a/c

BC’s bank a/c

NPCI switch

Authentication

1. Withdrawal request

3.NPCI request

6. Debit

7. Credit

8. Info- IVRS/ SMS

9. Cash

Common technology infrastructure across customer service points

Bank branches 70,000 today

85,000 by 2013ATMs

45,000 today100,000 by 2013

POS terminals500,000 today

1,000,000 by 2013

MicroATMs1,500,000 by 2013

Mobile, internet, phone bankingAny where, any time access

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Innovations from the lower end can migrateto the higher end.Example: cash transfers

Innovations from the higher end can migrateto the lower end.Example: railway tickets

Technology can be used to drive inclusionSolutions lower in the pyramid are more inclusive

Multiple smartcardsHigh cost, high complexity, low flexibilty

Ram

NREGA

Pensions

IAY

RSBY

• Expensive and Duplicate H/W, S/W & Infrastructure for Govt.• Duplicate records and lack of integrated MIS and monitoring

Backend Assisted/Device Resident

NOAPS

Confusing array of cards and A/Cs

AAD

HAA

R in

fra

Ram

AADHAR linked backend and authentication system

• 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

Common application

infrastructure

PDS

NREGA

RSBY

Online AADHAR Authentication & application

ResidentBackend Assisted/Device

Online “virtual card” + mobile self serviceLeast cost, reduced complexity, high flexibility

Increased Access via Mobile Self ServiceEnhanced flexibility and empowerment to residentsReduced Cost and Complexity

Aadhaar enabled Offline vs Online solution

Issues Offline OnlineAddresses 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 Real-time Multi-modal Can work without connectivity

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

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