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A little epoxy can unstick India’s welfare system




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Prime Minister Narendra Modis’ model of welfarism is not new to India: previous rulers also subsidized food and fuel, and donated rural hospices, toilets and paid labour. The advantage of Modis comes from technology. A year before the 2014 elections that brought it to power, the government, then led by the Congress Party, piloted direct cash transfers to beneficiaries, inspired by the popular Bolsa Familia program of former Brazilian President Lula daSilva. . Modi took that modest $1 billion start and turned it into a $300 billion voting magnet: And he did it with the help of 12-digit numbers.

These numbers and the identity cards bearing them are known as Aadhaar. Its abiometry-based system through which almost everyone in the second most populous country can prove who they are. Aadhaar, which means foundation in Hindi, supports more than 450 million no-frills savings accounts and has boosted the use of mobile internet for financial transactions even in remote villages.

More and more, though, it’s starting to look like a bit of epoxy putty literally in the very foundation of Modis’ welfare package.

Fingerprinting 1.33 billion people and saving their personal information and iris scans to a central repository was no small feat. This was touted as a big plus in a corruption-ridden country where state benefits struggle to reach legitimate beneficiaries.

However, activists have highlighted numerous incidents of benefit denial: fingerprints fade with heavy manual labor; correcting data entry errors can be a nightmare. These problems have been largely ignored.

Now there is a growing problem in the other direction: Aadhaar is used very successfully by fraudsters. Blame it on the ubiquity associated with lax controls. While the unique identifier was designed to make welfare programs more efficient, private entities wasted no time in realizing its potential. Banks and telecom operators have used Aadhaar to perform online know your customer checks, which has significantly reduced their customer authentication cost. In the process, Aadhaar became ubiquitous and private data began to appear for sale on the dark web.

The government’s response was to sweep everything away. Anything that casts doubt on the integrity of the system is ignored. It’s no surprise: after choosing a technology and making it universal, policymakers have no other way to build trust in transactions. In 2018, the Indian Supreme Court restricted the use of the database and prohibited private entities from using it to find out your identity. customer checks. Nonetheless, New Delhi has since circumvented opening legal backdoors for the private sector to continue exploiting.

A red flag about identity fraud came last month. The Unique Identification Authority of India, or UIDAI, has issued a notice asking people not to give out photocopies of their cards as they can be misused. Additionally, the advisory states that only users licensed with the authority can query the database to authenticate the identity; establishments such as hotels or cinemas are not permitted to collect or retain copies. After people started wondering why this warning was being issued when everyone’s Aadhaar information was already circulating everywhere, it was withdrawn the same day and replaced with new guidelines that advised people to exercise normal caution. .

So what’s going on? TheMorning Context, an Indian news site, recently made an alarming tale of scams. It seems anyone can learn how to clone a fingerprint with epoxy putty on YouTube; and anyone can buy an ID card online. Fingerprints can be taken from digitized deeds of sale. Or, to steal money from bank accounts, one could hack a mobile app used by small village shops that double as micro ATMs for Aadhaar holders. There is no data on the full extent of defrauded social benefits, defaced accounts and recorded criminal complaints, Morning Context added.

More troubling than the crime is the official silence on its prevalence or severity. The Reserve Bank of India recently released Payments Vision 2025 which gives a nod to the significant growth of the Aadhaar Enabled Payments System (AePS) through the trade correspondent assisted model. More than 2 billion of these ATM micro-transactions took place last year; it is a $38 billion entanglement of Aadhaar with the banking system, all on behalf of clients at the bottom of the economic pyramid. (1) Yet the RBI vision document, which has integrity as a key pillar, has nothing to say about strengthening security for deposit, withdrawal and transfer services used by the poor.

Then there is the welfare plank: AadhaarPaymentBridge System is the way the government transfers money to beneficiaries. Even here there are weaknesses. In 2018, Ram Sewak Sharma, the former head of UIDAI, went public with his Aadhaar number on Twitter and dared privacy activists: Show me a concrete example where you can hurt me! , someone managed to register Sharma as an eligible farmer and the Modi government paid him three cash installments. You can split hairs on whether the vulnerability was in Aadhaar or elsewhere, but the hacker had proven a point.

Modis new welfarism stays on Aadhaar. But if there are cracks in the building, they should be reported not to scare users, but to raise their awareness. At the same time, India needs a strong data protection law. Losing money is bad enough. But it’s scary if a bad actor can place a person in a specific location or tie them to an activity using a bogus transaction. Sealing wax in the trust foundation just won’t do.

More from Bloomberg Opinion:

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Trust, privacy and indies must protect both: Andy Mukherjee

(1) The most common public digital payment service in India is Unified Payments Interface, or UPI, which is widely regarded as a remarkable innovation from a developing country.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News.

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