ATMs, card terminals to scan UID biometrics

MUMBAI: All new credit card swipe machines and automated teller machines (ATMs) will be required to have a mechanism for Aadhaar authentication using biometrics. The Reserve Bank of India (RBI) is understood to be preparing such a directive to improve security and promote financial inclusion. 

The central bank had been debating between the international 'chip and PIN' and Aadhaar-based authentication to provide additional security for card transactions. Although RBI appears to have reconciled to a combination of 'chip and PIN' authentication for existing customers and biometric checks for hitherto unbanked cardholders, the challenge is in the acceptance devices. 

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. 

"The cost implications will be huge. Banks may have to divert funds for developing business to building the infrastructure," said a banker. Another banker said that it was equivalent to investing in building a metro after having spent money on roads. 

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. 

Source : http://economictimes.indiatimes.com

Earlier this month, RBI cleared banks to allow customers to open accounts based on eKYC (electronic compliance of 'know-your-customer' norms). Under this, banks can establish the identity and address of the customers by accessing the Aadhaar database after the customer provides his biometric identification.