NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, June 27, 2014

Despite the uncertainty surrounding the future of the Unique Identity (UID) project, or Aadhaar, the Reserve Bank of India (RBI) is testing a mobile-based payments system linked to this platform. Remittances through this platform skip the traditional banking channel and are aimed at including the unbanked into the financial system.

Pilot projects relating to this system, underway across various parts of the country, are studying whether telecom operators such as Airtel and Vodafone can successfully transfer money between their so-called pre-paid wallets linked to Aadhaar. Seven operators including Airtel, Vodafone, ItzCash andOxigen are running these pilot projects.

This is how the system works: A person with an Aadhaar number and a mobile phone can open a mobile wallet by visiting a store of a wallet operator, and load cash into his/her account. Following this, she/he gives directions for the transfer, through SMS, to a recipient with an existing Aadhaar-linked mobile wallet. The recipient goes to a store (the operator?s own or one a licensed kirana or telecom store), authenticates herself/himself through the UID number and biometrics, and receives the cash.