The article by M. Rajshekhar was published in Scroll.in on December 22, 2016. Sunil Abraham was quoted.
In 2006, Ajay Trehan set up AuthBridge, a background verification company in Gurgaon. That was a time when business process outsourcing was booming. Global companies like Citibank were relocating back-office functions to India. Outfits like AuthBridge sprang up in response to help these companies find qualified staffers. They vetted applicants by running identity checks, verifying education and employment records, doing reference checks and more.
Ten years later, AuthBridge’s client profile has changed. With rising insecurity over crimes in India’s cities, like the December 2012 gangrape in Delhi, or the rape of a young woman in an Uber taxi in 2014, local companies – sizeably from e-commerce and businesses with delivery services – have also started vetting employees and partners to check if they have any criminal history. “Now, we have about 700-800 clients,” said Trehan. “Of them, just 20%-30% are foreign companies.”
AuthBridge’s verification process has changed too. Earlier, its employees used to physically verify the credentials of an applicant by travelling to her school or college, meeting her previous employer, vetting her identity papers with the government department that issued them, and so on.
Now they simply run a query on an electronic database.
Aadhaar enters the private sector
Aadhaar, as India’s Unique Identity Project is called, aims to give a 12-digit unique identity number to all residents by collecting their fingerprint and iris scans. As of September, its database, maintained by the Unique Identity Authority of India, held the names, addresses and biometric information of more than 105 crore people.
The project was created by the United Progressive Alliance government in 2009 to reduce leakages in the country’s welfare programmes.
But, quietly, a range of private sector companies have started using it. This includes verification firms like Authbridge, banks like HDFC, telecommunications companies like Reliance Jio, among others.
So far, most discussions on Aadhaar have focused on its utility for welfare delivery and the risk of government surveillance. But as private sector companies incorporate Aadhaar into their systems, fresh questions and concerns are emerging about what this means. A recent tweet by a journalist that went viral encapsulated these concerns.
To understand the rewards and risks of the use of Aadhaar by private companies, here is a detailed look at how they are using it.
Five ways of using Aadhaar
The first way in which companies are using Aadhaar is pure authentication. This is how Authbridge uses Aadhaar. It sends a name and Aadhaar number to the Unique Identity Authority’s server, which responds to say whether they have matched.
Apart from background verification companies, Aadhaar-based authentication can also be used by employers. “A factory hiring women or a security agency hiring guards and wanting to be sure these people are who they claim to be,” said Pramod Varma, the chief architect and technology advisor for the Aadhaar project.
It could also be used by regulated entities with strong Know Your Customer or KYC norms like banks or telecommunications companies. In the old days of branch-based banking, KYC was not a problem, said Varma, since “the bank manager knew all his customers”. But now, KYC is much harder since banks have moved to “core banking with millions of accounts in the server”. Instant Aadhaar-authentication, he said, is useful for verifying customers.
The second is authentication plus. Here, at the time of authentication, a company also downloads the customer’s data from the Aadhaar database. This is what companies like Reliance Jio are doing.
When a customer provides his Aadhaar number to the company, the company not only runs a query on the Aadhaar database to verify the name and number, it also downloads other information about the customer held on the server, like address, date of birth and gender.
This data can be used to electronically fill out the Know Your Customer forms, replacing what is right now a manual process, said Anupam Varghese, the head (products) of Eko India Financial Services, a financial services startup in the phone banking and remittances segment.
It is a disruptive proposition that companies find useful. In India, the cost of enrolling customers is so high, said Abhishek Sinha, the founder of Eko, that it prices a set of financial products beyond the reach of most Indians. “Authenticating a credit card customer and vetting her identity papers will cost anywhere between Rs 150-Rs 200,” he said. A company can recover that investment only if the customer racks up at least Rs 10,000 on the card, assuming a 2% margin on card transactions.
With its instant authentication and automatic form filling, Aadhaar-based electronic Know Your Customer, said Sinha, slashes those costs and makes it easier for companies to offer financial products which become viable even with a smaller volume of transactions. This allows the growth of financial products for less affluent customer segments.
Subsequently, these companies might pad up those databases by adding their own data. This is a third model of using Aadhaar: authentication plus private database.
For instance, TrustID, a mobile app which claims it can verify “your maid, driver, electrician, tutor, tenant and all service professionals” using Aadhaar, wants users to rate the services of the people they eventually employ. In effect, it is creating a private database.
Others, like Eko, are adding financial transaction histories to the Aadhaar data.
While these three uses are built around Aadhaar-based authentication, the remaining three uses – database sharing, data broking, deduplication – pivot around use of just the Aadhaar number. They are based on recent changes in how companies use customer data.
The customer data boom
Customer data has acquired centrality for several Indian companies, particularly startups in e-commerce and financial services.
In some sectors, Varma said, “the cost of switching [between rival companies] is very low,” which heightens the need for customisation. “The better you can serve, they more sticky you get for a customer.” In other sectors, said Varghese, competition chips away at margins. Which is another reason to try and come up with better services and products.
This is where data can help.
In a conversation in October, Nandan Nilekani, software entrepreneur and the first chairperson of the Unique Identity Authority of India, explained why. “Companies like Ola compete with global companies like Uber which have a tremendous advantage in that they have more data – more customers globally – and better algorithms,” he said. If Ola has 5 million customers, Uber has 100 million. Which means Uber’s algorithms – thanks to pattern recognition and machine learning – will be more accurate.
For all these reasons, said Varma, companies in a handful of business verticals are trying to create “a 360 degree view of their customer”.
What has enabled this is a couple of technological trends. The ability to store and process data, said Nilekani, has gone up enormously in the last 15 years. At the same time, data itself has proliferated as electronic devices like mobile phones create records of voice, photos, messages and the locations of customers.
“All this is realtime data. So, on scale, speed and frequency, we have seen a jump,” said Nilekani.
This rising appetite for data is resulting in a couple of novel outcomes.
Enter, the sharing of customer data
Indian companies have begun sharing databases.
A good example is an experimental partnership between Eko, the banking and remittances company, and Capital Float, a financial services startup which gives short term loans.
The two companies worked out an arrangement where Eko shared a part of its database about its distributors with Capital Float. This shared information contained aggregated and anonymised information on distributors and their working capital positions, said Varghese. Capital Float evaluated the database and came back with a list of distributors it could lend to. Eko, then, forwarded these offers to the distributors. After taking their consent, data about the distributors who were interested in the loans was shared with Capital Float.
On the surface, this is a counter-intuitive development: if customer data holds the key to competitive advantage, companies should closely safeguard their data.
But as it turns out, there are strong reasons to share data.
Both Eko and Capital Float, for instance, are small, specialised players in the financial services market which is dominated by banks. Data sharing is one way to compete with banks by offering complementary services to customers.
It is not clear how endemic data-sharing will get. According to Varma, it will be used selectively. “I cannot see organisations sharing databases at will,” he said. “They will be shared only if they can be used to offer an additional service to the client.”
But a programmer who works at iSpirt, a product software evangelising association based in Bangalore, and who did not want to be identified, said the trend will grow. In the financial sector, as new players like mobile wallet companies acquire more customers, banks that refuse to share data will miss out on emergent markets, he said. “Keeping everything behind closed doors – not participating in data exchanges – is now harmful,” he said.
Sunil Abraham, who heads the Centre For Internet and Society, foresees the rise of another kind of data-sharing – by companies that aggregate customer data from multiple sources and market that to clients. These could be data brokers like US-based Acziom, he said. These could also be more specialised firms like medical transcription companies, which simultaneously serve hospitals, insurance and pharmaceutical companies.
The question is: what does all this have to do with Aadhaar?
The utility of Aadhaar
Aadhaar makes it easier to compare and combine diverse databases.
This is what India’s microfinance companies are doing. As Scroll.in reported recently, Microfinance Institutions Network, an association of microlenders, has told its member companies to seed the Aadhaar numbers of their borrowers into their databases. By searching the databases for the Aadhaar number of a prospective borrower, it will be possible to identify if she has already taken too many loans.
This is a scenario Nilekani bristles at. “You do not need Aadhaar for that,” he said. “You can triangulate databases using email or phone number or name.”
But the iSpirt programmer said, “With Aadhaar, the level of certainty is higher than what you would get by using name, phone number or email.” Between databases, the spelling of names might vary. Phone numbers change, especially in a country like India where prepaid mobile connections outnumber postpaid connections. Only a small part of the country’s population uses email. With Aadhaar, said the programmer, it gets easier to correlate databases.
Aadhaar, added Varma, can also be used to clean up databases. Banks, he said, can use the Aadhaar number to create better customer profiles by identifying all accounts owned by a person. This is the fifth use – deduplication.
What it all means
The implications are obvious. A lot of companies already had databases about their customers. Now, as Nilekani said, technology is allowing the collection of ever greater amounts of information about us. The sharing of databases means companies will have ever more detailed customer profiles.
In a sense, we are entering a future where multiple databases – including several that we are not even aware of – will contain information about us. A hospital and an insurance company might share their records. Or intermediary companies, which service both of them, might create their own databases.
This information will materially affect our lives. As already happens online, companies will increasingly base their products on algorithms that parse data about our behaviour and then offer a customised price – which could be geared to serve or exploit us.
In a sense, much of this is a familiar trajectory. The United States too, as the iSpirt programmer said, “saw a lot of irresponsible data sharing without enough control for civilians”.
That is where India is heading as well. As Scroll noted in its article about TrustID, when the company creates scores for the workers who use its app, they might not always be aware of that rating – or be in a position to challenge that rating.
There are large questions here. Who owns the data about you in a company’s database? Take your information in, say, Ola’s database – the address from where you get picked up or dropped, the phone number, the places you visit most often. Is the data owned by you, Ola or the driver? Should you have a say if a company wants to share this data? If you grant permission, how does one ensure it is used correctly?
Right now, as the next story in this series will show, this is a poorly regulated landscape.
This is the third part in a series on the expansion of Aadhaar and the concerns around it. The first two parts can be read here.