Aadhaar has the potential to transform financial services industry, including banking, insurance, lending, payments, according to Internet and Mobile Association of India (IAMAI).
Conventional paper-based KYC or authentication is a resource-intensive process; in terms of time, manpower and operational expenses.
For start-ups looking to provide pan-India services, such a compliance burden can be cumbersome and a bottleneck.
Estimates suggest that in a paperless platform, financial institutions can reduce costs by 2-3% in banking products and 20-30% in insurance products.
With the deep penetration on mobile-based internet connectivity, Aadhaar-based e-KYC and e-sign will allow financial service providers help hundreds of millions of Indians instantly open savings accounts and give them access to various other financial services like investment, insurance, formal credit, IAMAI said in a statement.
This would bring a large section of the unbanked Indian population under the ambit of formal finance and improve their financial health.
Recent market analysis suggest that paperless applications now have a 300% higher conversion into disbursed accounts in comparison to normal online cum offline process.
This is because digital transactions are more efficient in terms of transparency, faster processing, lower chances of tampering with digital documents, faster verification and many such factors.
IAMAI also stated that biometric-based verification and authentication is perhaps the best method to digitally empower the illiterate/semi-literate population; especially in a country where the language differences are often the biggest impediment to communication.
The association is of the view that the biggest impediment to 10X growth of the industry is paper-based verification and authentication process.
The association would like to highlight that even a powerful regulator like the RBI has shown its lack of confidence on 100% e-KYC by mandating paper-based KYC a year after OTP based e-KYC.
"The association is keenly aware that there are certain basic problems with the security aspect of Aadhaar. Many social groups have also hinted at possible misuse of Aadhaar data. The UIDAI is cognizant of these facts and have taken certain steps to prima facie address such concerns," the statement said.
The association, as the largest representative of the digital sector in India and one of the direct beneficiaries of digitalisation of industry, is of the view that while the usefulness of Aadhaar is unquestionable, the concerns, too, have certain merit.
IAMAI urged UIDAI to initiate multi-stakeholder consultation involving the entire digital ecosystem as soon as possible to discuss the issues pertaining to Aadhaar.
The association expresses optimism over a collective approach that can help iron out the creases in the near future.