Technology as enabler for electronic benefit transfer – Case of Micro ATM, BC, Aadhaar Authentication System

November 29, 2012

Challenges Challenges

1. Benefit payments are made in non-standard methods that vary at state level, district level, and often block level, with high co-ordination costs.

2. Stakeholders and concerns:i. Government: Ensure that the intended beneficiary is indeed the

actual recipient, Visibility and auditability, citizen dissatisfaction ii. Banks : Financial viability, policy uncertainty iii. Resident : High opportunity and transaction costs

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Desirable features of an efficient EBT system Desirable features of an efficient EBT system (1/2) (1/2)

1. Convenient single window enrollment process

2. Minimal overhead for Government.

3. Standard and common process for all Line Ministries and State Government to send money to a beneficiary’s bank account in a timely way. This also reduces co-ordination costs.

4. Auditability and transparency of process to ensure that the correct beneficiary receives the transfers.

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Desirable features of cash transfer systemDesirable features of cash transfer systemfor beneficiaries for beneficiaries (2/2)(2/2)

5. Beneficiaries should have the choice of multiple convenient locations to access cash. This may include bank branches, microATM customer service points, post offices, citizen service centres, etc.

6. Beneficiaries should be able to access cash conveniently through a network of microATMs at the grassroots level, or using ATMs, mobiles, tellers at branches, postman, etc.

7. The cash transfer system needs to be deployed at scale with 10 lakh transaction points to cover 7,00,000 villages

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Why Aadhaar?Why Aadhaar?

1. One time Aadhaar enrolment and linkage with scheme2. Aadhaar can act as a financial address for transfer of all

EBTs using Aadhaar Payments Bridge3. Standard platform approach thus reducing coordination

costs5. Interoperable cash withdrawal points using Aadhaar

authentication service offered as a public good

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Aadhaar Payments BridgeAadhaar Payments Bridge

Aadhaar Payments Bridge

Existing Account

State Governments

Family

Aadhaar Account

8384 8239 5837 27390239

4390 9203 9593 397802232

1. The Aadhaar Payments Bridge has already been deployed by the National Payments Corporation of India.

2. The Aadhaar Payments Bridge can handle crores of transactions on a daily basis.

Employers

Government of India

Oil Marketing Companies

Sponsor Bank Or

India Post

Aadhaar +

All G2P payments into one accountAll G2P payments into one account

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Aadhaar Payments Bridge (with Account Mapper)

Multiple Schemes

One Aadhaarlinkedaccount

Interoperable cash withdrawal pointsInteroperable cash withdrawal points

MicroATM network at the grassroots levelMicroATM network at the grassroots levelWith MicroATMs, any Aadhaar holder can:

1. Withdraw money2. Deposit money3. Send and receive remittances

Over 10 lakh locations where microATMs can be deployed:1. 1,00,000 Bank branches2. 1,50,000 Post Offices 3. 4,00,000 Fair Price shops 4. 1,50,000 Fertilizer shops5. 1,00,000 Citizen Service Centres6. 1,00,000 PACS7. 25,000 petrol stations8. 10,00,000 kirana shops

Advantages of AEPSAdvantages of AEPS• Beneficiary can receive money at doorstep• Inter-operable system thereby ensuring

customer is not tied to one bank’s BC• Network of BCs, bank branches and Post

Office can leverage a single biometric authentication system accessible through microATMs

• Efficiency in public expenditure as no need for banks to separately capture biometrics and develop their own de-duplication and Authentication systems

Aadhaar AuthenticationAadhaar Authentication

1. Aadhaar Authentication service validates the identity of the Aadhaar holder using fingerprint, iris and mobile based authentication methods.

2. The UIDAI has built an Aadhaar authentication system that can service millions of authentications on a daily basis.

3. The Aadhaar system is a first worldwide, due to the challenges of biometric technology at such scale. Online authentication makes it possible for Government and Banks to focus on service delivery rather than tinker with biometric technology.

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End-to-end transparency and accountabilityEnd-to-end transparency and accountability

Aadhaar Pension ID

8384 8239 5837 3883923

4390 9203 9593 8592374

Aadhaar Account

8384 8239 5837 27390239

4390 9203 9593 397802232

Aadhaar MicroATM

8384 8239 5837 736509

4390 9203 9593 583902

Aadhaar linkage in the Government and Bank databases provides end-to-end visibility of subsidy and benefits payments from Government to the beneficiaries.

Advantages of APB to DepartmentsAdvantages of APB to Departments• Removes fakes/ duplicates from the beneficiaries list leading to savings• Eases the entire process for transferring benefits as the Govt. just needs to know

the Aadhaar numbers of the beneficiaries without seeding bank account details in every scheme database

• Eliminate Errors/Frauds as the resident is in control of his data at both ends (Department and Bank). Direct linking ( of Domain ID with Bank Account) without Aadhaar is a non-trivial problem.

• Ensures Scalability as each scheme does not require to populate their database with bank account details. APB is a platform

• Bank account changes do not affect the transfer systems for various schemes• Resident-centric view of payments under various schemes. This will enable

weeding out those people who may be availing LPG as well as Kerosene subsidy and benefits of multiple schemes.

• Digital audit trail & Transparency• Real time monitoring and efficient funds & program management

Advantage of APB to BeneficiariesAdvantage of APB to Beneficiaries• No need to open multiple accounts. Just open

one and link it to Aadhaar.

• Residents more comfortable in disclosing only the Aadhaar number to Govt. Agencies ( e.g. LPG Dealers) rather than bank account details

• In case of change in bank account, resident does not need to convey account details or change in bank details to each department that he deals with

1111 2222 3333

EBTs using Aadhaar – a snapshot

Link Aadhaar Aadhaar Enabled Bank Accounts (AEBA)Aadhaar Enabled Payment System (AEPS)

Aadhaar Payment Bridge(APB)

1. Digitize data2. Link Aadhaar

1. Open / link AEBA2. Appoint BCs and roll

out AEPS

1. Enroll for Aadhaar2. Provide Aadhaar to

agencies/bank

Thank YouThank You