BENGALURU: Several private financial services companies that relied on authentication agencies to verify customer antecedents on the Aadhaar database are being denied access to the service amidst rising concern over data privacy. Fintech startups across the insurance, lending and broking sectors told ET that although there is no written directive to the authentication agencies from the Unique Identification Authority of India ( UIDAI ), they have been unable to access these services since the Supreme Court made critical observations around multiple unregulated entities accessing the database during the hearing on privacy concerns around Aadhaar.“We have stopped allowing private unregulated entities from using the Aadhaar database for authentication of their customer base till further notice from UIDAI. This has been done on the basis of the Supreme Court observation on March 27,” said Ashok Hariharan, founder of IDfy , which provides authentication services on Aadhaar and electoral databases as a sub-authentication user agency or AUA for Khosla Labs . UIDAI did not reply to detailed email queries from ET on the development. Typically, the fintech industry, which offers a slew of services, has relied on access to the Aadhaar database for quick customer verification. They relied on the network of AUAs registered with UIDAI as well as sub-AUAs to access this service.Experts said as multiple fintech players mushroomed in this space, the UIDAI has not processed all their applications for registration, thereby forcing them, to use the services of the existing agencies. Now, as debate around data privacy and protection of citizen data grows more acute along with the country’s apex court asking pointed questions on the usage of the citizen data, authentication agents are blanking out third-party companies fearing data leak and public backlash. Industry experts are of the view that if financial services companies are unable to utilise the Aadhaar route for customer verification, they will have to resort to using driving licences and permanent account numbers ( PAN ) that will increase the paper trail and hike transaction costs.“It would be a body blow to the business cases for fintech companies which are based on Aadhaar authentications for customer acquisition,” said Jitendra Gupta, managing director at digital payment company PayU India. “It would be a huge deterrent to take financial services to the masses and affect the business model of mobile wallet companies.”Others such as online stock brokers, who onboard clients through eKYC and online insurance agents, could also be affected. While established fintech companies like online broking services provider Zerodha, PayU and others could get authentication registration from UIDAI in the future, early-stage startups will be left out, fear industry insiders. On January 12, a number of industry executives formed a coalition to reach out to the Supreme Court to ensure that Aadhaar authentication for service providers do not get stopped.As per data shared by UIDAI, the number of eKYC transactions that have happened till now stands at 504 crore, being done through 254 authentication agencies. Also, almost 18 billion authentications for customers have been done till date.“Aadhaar has brought down the costs of servicing all customers by ten times. Even fintech startups are willing to serve the poor with low-cost digital products. Today’s charged up anti-Aadhaar atmosphere is hurting law-abiding startups and tipping the scales against inclusion,” said Sanjay Jain, chief innovation officer at Centre for Innovation Incubation and Entrepreneurship at IIM Ahmedabad . Industry insiders said the introduction of new security features like virtual IDs will take away the fear of unregulated private companies storing the Aadhaar numbers of customers, but until then, small startups will struggle to gain access to authentication services.