Inside India’s data fortress

With more than one billion data profiles already under its belt, India’s biometric database has turned an ultra-modern ideal into an everyday reality. But such hi-tech convenience does not come without unprecedented risks

 
Inside India's data fortress
An Indian citizen gives his fingerprints at a biometric camp 
Author: Kim Darrah
July 5, 2017

Located in a sleepy suburb of India’s southern city of Bangalore is a fortress-like data centre, tightly guarded by a triple layer of security. Contained inside are the biometric data profiles of more than one billion Indians – or 15 percent of the global population – who have each provided their fingerprints and iris scans for the world’s largest biometric identification system.

Underneath an armour of encryption, every biometric profile is linked to a 12-digit code known as an ‘Aadhaar’ number, which functions as an officially recognised identity for each given individual.

The number of people registered on this system has rocketed from zero to a billion in just seven years, now covering 99.5 percent of Indians over 18 years old. These registration numbers are a major breakthrough in India, a country where up until 2009 almost half of the population did not have any official identity papers. Now, a $100 biometric scanner – available to businesses and government organisations alike – can verify in a matter of seconds whether someone’s true identity matches who they claim to be.

A key to everything
The implications are enormous. The overarching aim is to rewire the entire economy and governance system, plugging in each member of the population via their biometrics to a new digital framework – something that has never been attempted before by any country. The system is now having an impact on how just about everything is done, from banking and hospital check-ins to mobile phone contracts and tax returns.

Number of Indian citizens registered to the Aadhaar system (billions):

0

2010

0.1

2011

0.2

2012

0.4

2013

0.7

2014

1

2015

1.1

2016

Last year, with the biometric database more or less fully in place, the government launched a new layer to the framework, known as India Stack. The tech, hailed as the “bedrock of digital India”, is a series of connected systems through which people are able to store and share personal data, such as tax filings, bank statements and health, school and employment records. The unique key needed to access the data is a biometric scan of the individual in question.

With India Stack, people can open a bank account, take out a loan, share medical records or start a mobile phone contract using just a fingerprint or iris scan. On top of this, each person’s individual realm of India Stack can be reached through Aadhaar-compatible smartphones, which use iris-sensitive cameras or fingerprint identification.

Following Indian Prime Minister Narendra Modi’s recent push for demonetisation, the government took the system one step further by establishing Aadhaar-enabled financial transactions through smartphones. This payments system makes it possible to transfer money using only a fingerprint and a mobile phone. Already, 337 million Aadhaar numbers have been linked to bank accounts, with 15 million transactions occurring through the system each day.

The power of identity
But while it is not lacking in ambition, the rapid rollout of the system has already suffered some sizable blunders. Failure to identify the fingerprints of manual labourers, as well as some fairly serious data breaches, have been among the numerous controversies that have marred the project so far. Biometrics are slowly becoming a standard feature of day-to-day life in India, and while the project has only just begun, a run-of-the-mill day in the not-so-distant future could involve tens of biometric checks for each person as they go about their routines.

“In many ways, a legally acceptable personal identity is the fundamental pillar on which all other rights and capabilities are based”, read a paper co-authored by Mukesh Sud, an associate professor at the Indian Institute of Management Ahmedabad. This notion that an officially recognised identity is powerful in itself is central to the appeal of the biometric system. Crucially, the ability to prove one’s identity is an important precursor to engagement with the formal economy, and is therefore part of the basic infrastructure of modern life. For this reason, the biometric system is not just a way of saving time and money, it also has the potential to be an effective tool for inclusive growth.

Speaking to World Finance, Sud said: “Imagine a casual labourer travels for work to a different state. In the absence of a definitive proof of identity, they are unable to claim any benefits from the government. They can’t even open a bank account, and find it difficult to keep their savings, which end up under a mattress.” Many of India’s poor are repeatedly held back by a lack of official documentation, becoming locked out of the formal economy. This manifests itself in a number of ways: access to basic financial services is often out of reach, with the simple act of opening a bank account requiring proof of identity. As a result, people who are already living in poverty are often forced to go to extortionate moneylenders as their only option for borrowing cash.

Another key issue for poor residents is the inability to secure official property rights without a recognised identity to attach them to. Without such property rights, assets are reduced to dead capital, which cannot necessarily be loaned, transferred or sold at will. As a result, people are often prevented from making full use of their assets, and are unable to reach their full economic potential. Worse still, exclusion from banking and property rights becomes mutually reinforcing.

The biometric system is not just a way of saving time
and money, it also has the potential to be a tool for inclusive growth

According to Sud: “You can’t borrow from a bank or get a cell phone connection as you have difficulty in establishing proof of who are you. You may not even have property documents, which also require an identity. So it ends up being a circular argument; one thing leads to another.”

This effect is compounded by the fact that an inability to prove one’s identity makes it difficult for people to access the very government privileges that are designed to help them. Taken together, the combined impact of the mass rollout of official identities for property rights, financial inclusion and access to government programmes can bring about a fundamentally more inclusive economy.

As such, the most marginalised members of society will be armed with a newfound means of identification, providing them with access to the privileges that make it possible to capture a slice of the productive economy.

Biometric benefits
From the perspective of the government, the ability to verify every citizen’s identity is a miracle of efficiency. In all middle and low-income countries, administering government benefits and keeping track of tax returns is fraught with logistical challenges. Indeed, in India, government schemes are often dogged by several layers of corruption and bureaucracy that can prevent welfare payments from reaching the intended beneficiaries. These leakages have traditionally created an exorbitant drain on resources, but as systems are switched to the biometric framework, they are slowly being plugged.

Without Aadhaar, the process of administering government benefits would be filtered through several layers of bureaucracy, with each representing a potential leak – be it the bank official, the person signing the cheque or the local government. According to Sud: “Everybody was just siphoning what they could, and some beneficiaries got maybe half of what they deserved. A few, in connivance with the government official in their area, could claim the same benefit multiple times and no one would be any the wiser. For instance, we have food subsidies for people below the poverty line, yet there were three or four times the number of claimants than the actual number of poor.”

One case that illustrates the potential for efficiency gains is that of a government office in New Delhi, where a biometric attendance system was recently installed using Aadhaar. Upon implementation of the system, 23,000 fictitious workers were discovered, whose wages were being siphoned off through the payroll. Collectively, these fabricated labourers were costing the government more than $3m a month.

Various impressive numbers have been publicised regarding the total savings and efficiencies amassed by the government as a result of the technology, with the World Bank estimating savings to be in the region of $1bn per year. This, however, is a relatively conservative estimate, and more extravagant numbers have been touted by the Indian Government: according to Finance Secretary Ashok Lavasa, by shifting 78 government schemes to Aadhaar-enabled ‘direct benefit transfers’, the public purse has already garnered an impressive $5.3bn in savings. Overall, the government claims the cumulative savings made through the project now stand at $7.6bn.

However, Development Economist Jean Drèze, talking to World Finance, cautioned against taking such estimates at face value: “It is very hard to trace the basis of most of these figures. They seem to be acquiring an aura of plausibility by sheer repetition.”

Certainly, the system has at times done more harm than good: often, when it is enforced for government schemes in rural areas, patchy internet connectivity can prevent the machines from functioning properly, which can lead to lengthy queues or a failure to distribute entitlements at all. Furthermore, while growing, India’s low rate of internet usage (see Fig 1) can also act as a barrier to inclusion. Such issues have led many to perceive the system as a frustrating and irrelevant layer of tech imposed by the government.

That said, as it is rolled out evermore extensively, there is no denying Aadhaar has the potential to profoundly improve the efficiency of the systems in place. By cutting out duplicates and linking Aadhaar to tax returns, the project could also go a long way towards stamping out tax evasion. There are plenty more schemes and government functions to which the system could be applied, which will contribute to increasingly streamlined administration in the future.

A man provides an iris scan for the Aadhaar database

Shaking up the markets
The newfound ability to verify identity is also shaking up entire segments of the economy by creating commercial ventures that were not previously viable. For one, branchless banking targeted at those in rural areas has previously been held back by prohibitively high transaction costs stemming from the need to establish customer identity. Yet by synching accounts to people’s biometrics, it could become feasible to reach entire new markets with microsavings and microcredit accounts. A variety of new financial instruments could also pop up, such as microinsurance and micropensions.

Take the telecoms industry, which is also being fundamentally shaken by the technology. Due to the necessity of establishing a customer’s identity to provide a contract, the industry was in the past held back by lengthy bureaucratic procedures and ‘know your customer’ regulations, which have now been dramatically simplified using the Aadhaar framework.

One telecoms player in particular, Reliance Jio, has upturned the entire market by setting data costs far below the prevailing rate. The company, which is a new player in the industry, has managed to enrol 100 million customers in just six months. Sud noted: “Reliance achieved [its] numbers so quickly because [it was] able to eliminate the paperwork involved. Without Aadhaar, it would have taken much longer and an army of people to check each of the applicants and verify their identities. The company has acknowledged it.”

The biometric system has therefore already dramatically affected the proportion of people with access to mobile data, making it an important force in bringing more people into the digital economy.

Guarding the fortress
From a security perspective, rewiring the entire economy and governance system onto a single, highly sensitive central database is a delicate process. Bangalore’s data centre may be fortress-like, but the question remains whether there can ever be a fortress strong enough to adequately protect the data that is being stored inside.

The question remains whether there can ever be a fortress strong enough to adequately protect the data that is
being stored inside

There is also something fundamentally permanent about biometric information. Unlike a PIN, it cannot simply be changed if it falls into the wrong hands – and worryingly, the track record of security protection is not perfect. In February, the Unique Identification Authority of India filed a police complaint against a bank after it was discovered to have illegally stored fingerprint details to attempt impersonations. The incident has since been dismissed as an isolated case, but has nonetheless dented the government’s claim that the system is totally impenetrable.

Furthermore, a huge leap in the amount of private data being stored against biometrics has heightened privacy concerns. Through innovations like India Stack, central servers are linking people’s Aadhaar numbers to a lifetime of private data, including medical histories, financial data, school records and residential addresses. While personal data being held on central servers is nothing new, the sheer quantity of sensitive data that is in need of protection creates an enormous and unprecedented challenge.

Protecting privacy
An even greater fear than that of the data centre being breached, perhaps, is the simple question of who might be handed the key. A fundamental criticism of the project is that a government-administered biometric database like Aadhaar essentially reformats the very relationship between citizen and state. World Finance spoke to Shyam Divan, a lawyer who is currently going through the process of representing challengers to the Aadhaar scheme in the Supreme Court. He said: “With multiple check-ins a day, everyone is essentially leaving a trail through which they can be tracked… We are talking about a brave new world where you have virtually no individuality or space for yourself.”

1.3bn

Population
of India

1.1bn

Indians are currently registered to the Aadhaar biometric database

15%

The above as a share of global population

99.5%

of Indians aged over 18 are enrolled

337m

Aaddhaar numbers are linked to bank accounts

15m

transactions take place each day

$1bn

The amount the World Bank estimates the system has saved the Indian Government
per year

Critically, the very prospect of the state maintaining a watchful eye can have tangible effects on the way people act and even think. “People know that even if they are not watching, they are capable of watching – that has a tremendous chilling impact in terms of behaviour”, said Divan. The concern is that, as well as undermining privacy, this can act to stifle political dissent.

“The government is constantly trying to reward its loyal supporters and marginalise its opponents. So a situation is rapidly developing where, firstly, everyone is being monitored all the time, and secondly, people know that it is in their best interest to be in the good books of the government. Obviously, this is bound to stifle political dissent, or any sort of dissent for that matter”, Drèze told World Finance. This leads to the question that hangs over the entire project: has the government gone too far?

The Supreme Court initially judged that enrolment in the scheme must be purely voluntary, yet being registered has now become a requirement for everything, from filing tax returns to buying a mobile phone. Now the database has been created, the purpose for which it is used seems to be ever-changing. Drèze explained: “Anything is possible. For all we know, the Supreme Court may direct the government to destroy the Aadhaar database next week. It is equally possible that some fanatic will become India’s next prime minister, use Aadhaar to consolidate his power, and create a virtual state of emergency. The point is, we should not take chances in these matters.”

The entire project now hinges on the prospect of designing a system that can create a strong enough shield to protect people’s privacy and civil liberties, without destroying its potential. As Sud said: “We must not throw the baby out with the bathwater. We have to get the best people to institute checks and balances in the system.”

Of course, this is not the first time technological innovations have come up against the important issues surrounding data protection and privacy, but the mass uptake of biometric data will make these debates all the more pertinent. Biometrics are rapidly seeping into people’s everyday lives on an international scale, as they are increasingly put to use in areas such as banking, telecommunications and voting. Furthermore, several countries – Germany, Bangladesh, Brazil and France, to name a few – are moving towards building centralised biometric systems of their own, which again will bring up important questions regarding the relationship between citizen and state.

Biometric systems could well become the new normal. When they do, we can expect something close to a futuristic ideal – but the meaning of privacy may never be quite the same again.