The Momentum of Aadhaar, India’s Universal ID System, is Increasing
India has a population of approximately 1.3 billion people today; however, the country does not have a formal system of universal identification for each of its citizens, analogous to a Social Security Number in the United States. As result, when individuals across the nation attempt to open a savings account, apply for a loan, purchase a mobile phone, or even try to request a passport, many of them are unable to do so because they lack proper identification records and proof of citizenship. The Unique Identification Authority of India under the Planning Commission of India embarked on a mission in 2009 to solve this overrun issue with the Aadhaar program.
The Aadhaar program has now enrolled more than 600 million citizens in under five years – granting citizens unique identification numbers (linked to their demographic information and biometric data) that will empower them to lead better lives by accessing products and services that may not have been available before.
Aadhaar Service Opportunities: Education, Healthcare, Communications, and Financial Services
Unitus Ventures (formerly Unitus Seed Fund) believes that the Aadhaar program and the propagation of universal identification numbers to all Indian citizens will bring new frontiers of technological innovation throughout India’s economic sectors. As a result, Unitus Ventures (formerly Unitus Seed Fund) is excited to watch as new startups disrupt their respective sectors. Although there are numerous sectors in India that will thrive with these new, exciting companies and will have Aadhaar numbers as an essential component of their inner workings, we believe that four particular sectors have the highest proclivity for early disruption over others. These four sectors are: education, healthcare, communications, and financial services. In this article, we have outlined the opportunities for how companies can disrupt and contribute to each of these four sectors by using Aadhaar and its universal identification numbers.
Education: longitudinal tracking and direct payments
The education sector, which broadly incudes K-12 and university education as well as vocational training, is perhaps the most basic and essential sector that Aadhaar can improve via a fundamental disruption: long term tracking of results. India currently lacks a formal system of tracking a person’s school record or employment history. As a result, the academic performances of Indian students have limited documentation and are not tracked over a student’s career, those that are tracked cannot be verified, and service providers and employers in India’s job market lack a high level of efficiency to properly match the most qualified job candidates of specific skills sets to the jobs that most require candidates with those qualifications.
India’s youth is increasingly mobile, moving with their parents as they seek economic opportunities, and moving to larger towns and cities to get better educational opportunities. An Aadhaar-linked academic record can enable each new school to be confident that it knows what previous education any student has received prior to attendance. As a result, policy makers and curriculum designers can track academic results of students over time, even as they move between different school systems in different states, in order to determine the outcomes of various improvements made to educational systems at the local or national level.
Aadhaar’s unique identification numbers can also be used by the vocational education sector essentially as a tracking mechanism that can link to a record of a person’s vocational skill set as well as his or her academic and employment history. For example, a mechanic who specializes in a specific field will be able to charge the proper fees for being the most qualified mechanic to best diagnose and fix a problem. By having the ability to track the academic and professional history of each person and increase the efficiency of the matching process in the job market, it will ultimately incentivize citizens to lead more productive careers because candidates will be able to finally prove their knowledge, skill sets, experiences and thereby be compensated accordingly.
In August 2013, the Indian Government launched a new program called the National Skill Certificate and Monetary Reward scheme through a training company, Centum Learning. In order a stronger skilled and employable workforce, this new scheme grants government monetary rewards, called Standard Training & Assessment Rewards, to its program graduates. “Training programs under the scheme are intended to develop and certify skills against industry standards. The assessment and certification processes involved are based on rigorous norms as per National Occupational Standards… Under the scheme, Centum Learning offers skills training on Industry recognized courses in order to orient and skill the youth on diverse job roles across priority employment sectors including, Sales in Telecom and Organized Retail, Customer Service skills in BPO, Telecom Installation & Fault Repair, Telecom Tower Equipment Operations & Maintenance, Gems & Jewelry, etc.” The rewards are directly transferred to the graduates’ Aadhaar-based bank accounts. Therefore, in order to be a part of this program, the government requires that each candidate be enrolled in Aadhaar.
By leveraging Aadhaar in such a way to electronically store academic and employment histories and fully incentivize productivity in the workforce through appropriate compensation in addition to supporting government programs, the growth of India’s economy will accelerate.
Healthcare: durable and complete electronic medical records
The healthcare sector is the second sector that will be disrupted by Aadhaar. Today, thousands of births each day in India are unregistered and these citizens continue living their lives with no formal identification records and no official medical history. The ramifications of not having a database of medical histories or at least a system to track medical records are the inability to properly diagnose patients, run robust statistical analyses to track and predict general health indicators and disease outbreaks, as well as the inability to efficiently allocate private and public funds. In addition, the government and private payers are unable to properly assess the individual risk factors of patients because of the lack of health information. As a result, patients who lead healthy lives and are in good standing can rarely be differentiated from those who have led unhealthy lives. Individuals are in turn charged insurance rates that do not match their actual health risk levels; ultimately, the lack of medical histories leads to a decrease in the affordability and accessibility of medical care for many of India’s people, especially India’s BoP.
With the advent of Aadhaar, medical professionals will be able to track and analyze an individual’s medical history from her birth by linking all of her medical proceedings to her Aadhaar number. By doing so, a medical database is created that can be accessed by the government, medical insurance companies, and medical providers, all adhering to appropriate privacy and use policy rules of course. By having this form of electronic medical records (EMR) in place, the government and medical insurance companies will be able to fully assess the risk factors of a patient as well as a population of patients, charge proper insurance rates, and grant government welfare benefits to those that need it most. In the long run, healthcare will be attainable to more Indians and doctors will have more information to better treat patients and decrease the likelihood of misdiagnoses, medical errors, and the risk of disease.
The intersection of the healthcare and communications sectors is one that is especially well-suited to be disrupted by Aadhaar. Similar to how in the United States, mobile healthcare and medical compliance are beginning to gain traction as electronic medical records across various databases are merging, treatments are being tracked through mobile devices, and data is being sent through the cloud, India will be able to create a flexible, robust EMR database through Aadhaar. As a result, medical professionals will be able track their patients’ medical compliance through mobile devices and in the long run, the general health of patients will likely increase.
Communications: reduced friction, lubricated by identity and money
The communications sector is the third sector that will be disrupted by Aadhaar. Specifically, the accessibility of mobile phones and the number of mobile phones in use in India will increase even further beyond current astronomical levels. In order to receive a mobile phone in India a valid form of identification is required – and as discussed earlier, many citizens lack official identification. Today however, any citizen can use his or her Aadhaar number as a form of identification to receive a mobile phone.
As mobile phones further penetrate the Indian population and the number of Aadhaar-based mobile applications increases, the frequency of electronic and mobile transactions will increase. One of the largest opportunities is in mobile financial transactions. India’s first and largest mobile payments solutions provider is Oxigen Services and their premier product is the Oxicash, a closed money e-wallet. “OxiCash is unique cash based online payment solution which is aimed at customers who use cash to make payments. It is a prepaid stored value virtual wallet where the consumer’s mobile number is the identity. It is unique payment solution developed by Oxigen which is completely secure.” With Aadhaar and the rise of mobile phones, Oxigen is looking to take its annual revenue of approximately $660 million (4000 crore) and increase it by more than 40% per year.
When consumers have easier access to mobile devices integrated with secure mobile money, like Oxicash, they will be able to make remote purchases, send money to relatives in distant locations, and ultimately become equal members of the digital economy, similar to what high income consumers with credit cards and bank accounts enjoy today.
Financial services: credit histories and direct transfers create opportunity
The financial services sector is the final sector that United Seed Fund believes will be most immediately disrupted by Aadhaar. By not having a formal form of identification, most citizens lack access to basic banking services, such as a savings and checking account. As a result, many Indians go through their lives without credit histories, the ability to make a remote payment via check or wire transfer, or the ability to take out loans from qualified debtors. Instead, many Indians borrow money from family, friends, and loan sharks who charge extremely high interest rates. With Aadhaar acting as a universal identification system, citizens will be able to open bank accounts, build a credit history, and have access to these basic banking services. By building a credit history, Indians will be able to take out loans from financial institutions, buy homes, and establish new businesses.
With the rise of mobile banking, citizens will be able to send money to each other through peer-to-peer transactions, complete electronic/mobile payments to businesses through their phones, and receive government welfare benefits directly to their Aadhaar-linked bank accounts. Today, the government sends qualified Aadhaar enrollees Direct Benefit Transfers through their Aadhaar numbers. Welfare beneficiaries withdraw money from micro-ATMs, which only require an individual’s biometric information with his or her Aadhaar number for confirmation.
Aadhaar is a still a young program that continues to enroll millions of individuals each month. Aadhaar will become a platform for new and existing companies to build and offer exciting products and services to enhance the lives of millions in India. Although we only discussed four sectors in this article, it is clear that Aadhaar-based products and services will be offered in some fashion in every sector of the economy.
If you are building a product or service that is based on Aadhaar, Unitus Seed Feed wants to speak with you. We believe that today, Aadhaar will do for India’s economy what smartphones did to the global economy ten years ago. We believe that Aadhaar-based startups can not only disrupt the Indian economy, but also profoundly empower millions of BoP citizens and improve their livelihood and well-being.