The Reserve Bank of India (RBI) is preparing directive to improve security and promote financial inclusion. All new credit card swipe machines and automated teller machines (ATMs) will be required to have a mechanism for Aadhaar authentication using biometrics.
There are 1.2 lakh ATMs and 10.30 lakh credit card swipe (Point of Sales, or PoS) machines. Banks are expected to add around two lakh PoS machines and around 20,000 ATMs next year. All these machines will need to have facilities to scan biometrics. This will significantly increase investment costs. The other implication is that traditional phone lines may not work to send scanned fingerprint images for verification. Banks say that new machines will require the equivalent of 3G data speeds to transmit biometric data.
Bankers say that the logic behind having Aadhaar-based authentication for hitherto unbanked customers is that these first-time customers may not understand the importance of password secrecy. Also, generating new passwords may be difficult when customers are dealing only through business correspondents and do not have access to branches.
Aadhaar is expected to get a big boost in the banking space with Raghuram Rajan taking charge as Governor. In his opening statement on taking charge, Rajan said, “I particularly want to emphasize the use of the unique ID, Aadhaar, in building individual credit histories. This will be the foundation of a revolution in retail credit.” This would mean that banks may start asking for Aadhaar numbers while disbursing personal loans.