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RBI puts on hold Aadhaar-based biometric authentication in PoS terminals

aadhaarYet another blow for Aadhaar project: Reserve Bank of India (RBI) has put on hold its decision to make Aadhaar-based biometric authentication for transactions mandatory, reports The Economic Times. Supreme Court had earlier asked the government not to link Aadhaar with any social benefit schemes and subsidies.

In the testing phase, biometric authentication took up to 30 seconds even on 3G connections, as opposed to 5 seconds otherwise. This means that the banks can continue to expand Point-of-Sale (PoS) terminals, till RBI decides to come up with a workaround.

In a November circular, RBI had given banks an option to start using EMV chips and pin or shift to Aadhaar, as additional factors of authentication to secure the present payment infrastructure. The circular followed a recommendation by a working group on Securing Card Present Transactions in 2011.

Banks are worried about the cost

This move was opposed by banks that felt that they shouldn’t have to spend crores to upgrade the infrastructure needed to enable biometric authentication. Apart from procuring ATMs that support this feature, they also had to upgrade to broadband at PoS terminals. The other issue they had was the high failure rate with biometric authentication, which means it could take longer for each transaction to be completed. RBI’s move was also questioned by MP Rajeev Chandrasekhar.

Procuring ATMs and PoS terminals with biometric authentication would have been difficult for banks as they say there are not enough manufacturers who can supply units that can accept traditional cards with magnetic strips, EMV pin and chip and biometric readers. Banks had voiced these discomforts over the use of biometric authentication for payments to the working group that was set up by RBI as well.

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Good news for wallet services

The ET report also states that the RBI has launched a pilot programme through which people will be able to withdraw funds they put in wallet services. Mobile wallets such as Airtel money, Itz cash, M-Pesa, and Moneycard allow people to add funds as use them for bill payments and other transactions. However, the apex body did not allow people to withdraw money without linking them to a bank account.

If people can withdraw these funds from PoS terminals using biometric authentication, it would help these services get more users, especially among the unbanked Indians.

What about eKYC and other Aadhaar linked projects?

Several services have been using Aadhaar details and biometrics for eKYC services and this decision will not impact that in any way. Banks can still use Aadhaar details to collect and authenticate details of a bank account holder instead of asking them to submit documents on a regular basis.

Former UIDAI chairman Nandan Nilekani had said that UIDAI had partnered (.doc file) with National Payments Corporation of India (NPCI) to launch Aadhaar based remittance service, which enables money transfer from one Aadhaar number to another number or to bank accounts and vice versa. At TiEcon Delhi in October, he had said this facility will be rolled out in couple of months. It is not clear if these system was affected by this decision by the RBI.

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