India’s central bank has said that all new point of sale devices issued by banks that accept electronic cash must come with bio-metric scanners that can work with Aadhaar, the unique identification number rolled out by the Indian government.

Bankers aren’t happy with the Reserve Bank of India’s directive as they fear an increase in costs. Implementing bio-metric recognition across banks and linking it to the Aadhaar backbone will be an expensive proposition.

API Data Flow for e-KYC (Image: UIDAI)
API Data Flow for e-KYC (Image: UIDAI)

Banks, however, have been given an option to choose between ‘chip & pin’ cards or Aadhaar based authentication (Source). International cards must have a chip and pin security feature, said the RBI. In September, the Reserve Bank recognized online Aadhaar authentication as valid proof to complete the mandatory Know Your Customer (KYC) process (pdf).

We think that this will be extremely painful and difficult in the short run but has its advantages in the long run.

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