After India’s banknote ban, private companies are using the country’s biometric database to bring financial services to millions

For two years, Indian officials have been trawling the country, from city slums to unelectrified villages, zapping eyeballs, scanning fingerprints and taking photographs.

Last month, Indian shoppers started to see the results. With the launch of a government-backed fingerprint payment system, tied to India’s growing biometric data bank, registered citizens can – in theory at least – now pay for things with the touch of a finger.

India’s extraordinary biometric database, named Aadhaar after a Hindi word for ‘foundation’, is the biggest of its kind in the world. It was initially sold to the public as a welfare delivery mechanism that would ensure the country’s 1.25bn citizens were each receiving the right quantity of subsidised rice or cooking fuel, while weeding out fraudsters.

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But now this pool of more than a billion people’s biometric data is being used by banks, credit checking firms and other private companies to identify customers, raising questions about privacy and security.

As one of his flagship policies, prime minister Narendra Modi pledged to create a “digital India” in which the country’s cash-centric economy would switch to credit and debit cards, squeezing the parallel economy of untaxed cash transactions and giving more citizens access to digital financial services.

In a surprise television announcement last November, Modi announced the demonetisation of 500 and 1,000 rupee notes (around £6 and £12), wiping out 85% of the country’s circulating currency overnight.

Two days later, when the banks reopened, long queues snaked around almost every branch, with millions lining up to open bank accounts for the first time. Many used their 12-digit Aadhaar number, linked to their biometric profile, to sign up. Within three weeks, 3m bank accounts had been opened using fingerprint verification, according to estimates.

The moment marked a radical change for India’s banking system, under which applicants were traditionally required to file photocopies of passports or voter IDs. Banks could take weeks, sometimes months, to verify them. Now applicants’ encrypted biometric data can be sent to the Unique Identification Authority of India (UIDAI), a government agency, to be matched against their Aadhaar data, re-encrypted and sent back to the bank.

Despite technical teething problems, the system is designed to allow very fast authorisation. “All this happens in a matter or two or three seconds,” explains Ajay Bhushan Pandey, UIDAI’s director general.

For Pandey, the benefits are clear: paper documents are easy to forge and hard to verify, especially in India where until recently thousands of people still used handwritten passports. Not so biometric data.

Privacy fears

Pandey emphasises that private banks and companies aren’t able to access the entire Aadhaar database, only to use the government interface, which allows them to verify identities.

Nonetheless, many Indians are worried about the privacy implications. Sumandro Chattapadhyay, a director at the Centre for Internet and Society thinktank, is one of them.

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For starters, says Chattapadhyay, the law governing use of the biometric database, fast-tracked through parliament last year, is flimsy when it comes to the private sector. Since India lacks a general privacy or data protection law, this leaves corporate use of Aadhaar services effectively unregulated, he says.

This is particularly worrying, says Chattapadhyay, because of the data-sharing possibilities opened up by Aadhaar. It makes it easier for companies not only to share information on individuals’ consumption and mobility habits, but also to link this data up with public records like the electoral register, he says. “Both lead to significant threats to privacy of individuals.”

Chattapadhyay’s fear is that private companies could eventually gain access to government-held personal data, such as income or medical records, while the government could use company data like phone records to target specific individuals in political campaigns.

Already companies are linking Aadhaar numbers with collected metadata. Credit-checking startup CreditVidya, for example, identifies clients using their biometric ID in combination with their internet browsing history and other data, to assign credit scores for users who have no record of loan repayments. Banks then store this processed metadata, for example whether or not someone’s Facebook name is consistent with the name on their bank account.

Its founder Abhishek Agarwal admits there are risks for users: “[I]f someone managed to hack the bank’s security system, as well as the Aadhaar database, they could potentially be able to link your Facebook or LinkedIn data with your biometric information.” But he says this would be hard to do.

Pandey insists the companies are carefully vetted before they can use Aadhaar authentication. But, like Agarwal, he acknowledges the system can never be 100% secure: ““I wouldn’t say it is impossible to break the system, but it is very, very difficult.”

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