Aadhaar has made no mention of who will bear the cost of biometric POS readers and biometric ATMs. Will the bank customers be dumped with the huge bill for biometric ATMs?
On 12th September, a leading daily wrote about how ‘all new credit card machines and ATMs’ will be required to have an ‘Aadhaar authentication mechanism’ using 
biometrics. Remember, the massively expensive Aadhaar programme has no clearance from parliament. Yet, according to this report, RBI is “understood to be preparing such a directive to improve security and promote financial inclusion.”
Just a few weeks ago, a Moneylife Cover Story dealt with the steady increase in bank service charges. This new directive will involve additional expenses which bank depositors will end up bearing under the guise of technology costs. So far, Aadhaar has made no mention of who will bear the cost of biometric POS (point of sale) readers (according to a senior banker, they will cost Rs8,000 each) and biometric ATMs (Rs4 lakh for the machine plus installation, maintenance, electricity, etc). According to the newsreport, banks are expected to add around 200,000 POS machines and around 20,000 ATMs next year. We have always wondered about the rush to keep increasing the ATM network by each bank when they claim that technology costs are prohibitive. Now, it is clear that we, the customers, will be dumped with the bill for biometric ATMs.
One banker has already been quoted as saying that the cost will be so huge that they may have to divert funds earmarked for developing business to building this infrastructure to support the government’s programme. The big effort at financial inclusion, and the effort to force people to open bank accounts in rural areas, was apparently part of this long-term plan that was carefully kept out of the public domain.
There are two other issues that need to be taken into account. While Aadhaar-based authentication is touted as the panacea for financial inclusion of illiterate masses, it has not worked. Between 2004 and 2007, several banks launched biometric ATMs, with much fanfare, around the country. They did not work and had to be quietly discarded. Before embarking on another financial misadventure, the government needs to prove that there is better technology, which will work, especially since RBI’s internal committees have expressed several misgivings about the technology.
We also need some authentic data about whether fingerprints and Iris scans have worked successfully on rural folks with calloused hands and faded fingerprints which caused biometric ATMs to fail last time. While the UIDAI has long been pressuring RBI to order biometric ATMs, it has been strengthened with the appointment of Dr Raghuram Rajan as the RBI governor. In his first speech after assuming office, Dr Rajan said, "I particularly want to emphasise the use of the unique ID, Aadhaar, in building individual credit histories. This will be the foundation of a revolution in retail credit.”
Meanwhile, check out the statistics of how forced financial inclusion has worked so far. Deputy governor RBI, Dr KC Chakrabarty, said in a speech, “While over 150 million accounts were opened, only 30 million transactions have taken place up to December 2012.” This low acceptance of banks continues to plague the system and is affecting the financial viability of banks. The government hopes to change that by forcing un-banked people to get their subsidies and direct benefits through bank accounts.
It is an experiment fraught with a lot of teething problems. But, a government in a hurry to meet deadlines before the general elections in 2014 is likely to force unviable decisions on banks, with the cost burden born by existing customers.
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What is point of quoting the price of POS terminals and ATMs and the running expenses (electricity etc.)? Banks are expanding ATM networks anyway. For all new ATMS and POS to be UID compliant, the real cost is only the extra cost for the biometric functionality over and above a normal ATM. If it costs an extra 5-8,000 for fingerprint and iris scanners features in a new ATM, it is hardly 1-2% of the cost. Once you add the overall running cost over the lifetime of the ATM, this additional purchase cost boils down to almost nothing.
ATMs have added lot of functionality in the past, while reducing prices as technology became cheaper over time. And the features being added this time are purely electronic - with no moving parts.
On top of this, UID could very well accelerate the deployment of Indian Rupay payment network - this system has much lower transaction costs than Visa and MasterCard.
The bankers have a habit of cribbing, and lobbing for rules that let them make more money. Have you asked a single banker what is the additional cost of UID functionality in ATMs and POS, compared to the costs of the bad decisions they have made on the lending that are now turning into bad loans?
2. ATMs have added functionality....cheaper over time." Cheaper for whom? For customers banking is becoming more and more expensive. Its your assumption that is flawed.
3. "UID could very well..." A pipedream. The same forces which are milking UID will ensure Rupay does not take off to replace Visa and Master. Since when cheaper and better won in India? Its all a matter of vested interests.
4. Bankers don't crib. They get even and more. Wake up. They have their way because customers don't complain enough. Look at the profits of private banks
5. Its not either/or as regards NPAs and UID functionality. Cost is cost and they are ultimately passed on to the users.
6. Finally, WHO WILL USE BIOMETRIC ATMS? Do you know whether banks want them as customers?
It seems you don't want to see the issues here. Why?
All I have stated is that the way this article is written is misleading, and the expected additional cost of biometric features on NEW ATMs and POS machines is not likely to be a major one, either as a share of the one-time purchase cost, or as a share of full lifetime costs. There is no attempt in the article to even present this data, and instead it presents the total cost of purchase. It even mentions the running costs like electricity - as if the new machines will suddenly start consuming a lot more electricity compared to the old ones.
Unlike some of the unscrupulous people you fight against, your readers expect a certain honesty of argument from you while making your case.
As in all matters, there has to be a sense of prioritization. Your focus on banking costs is commendable and helps all of us - you may want to keep it focused on the largest items, and the hidden costs due to banker's nexus with others like insurance.
On UIDAI, there are far bigger issues of lack of public and parliamentary oversight, the semi-private nature of the entity, and complete absence of data privacy laws. You have highlighted these in the past, and in my opinion, that's where the focus should stay.
There is a strident tone in a lot of your commentary and even in your response to my comment above. I understand some of it may come from experience, but please don't let it become a shell that hurts your ability to accept feedback and inputs from people who share your larger goals.
Facts will be available when people are willing to share them. If, despite our best efforts, people in positions of power dont share facts and numbers, there is nothing we can do.
If you notice the strident tone, you, as a reader could not have failed to notice that it happens after a BIG effort to get information using RTI, filing memorandums with the government and failing on several counts.
You may have also noticed that none of this is of benefit to us personally. So pardon me for failing to understand what is the point of your comments and why you are so keen on running down this effort.
Also, for your information, the All India Bank Employees Association is supporting this view. And MP Rajeev Chandrasekhar has raised these issues with the government. Isnt it interesting that none of them found the article misleading or inadequate. While you say that you appreciate our work, I do wonder why you are so agitated at the fact that I have take up an issue that will only save the average bank depositor some money.
Also, the issue of rising bank charges has extensively discussed in a cover story and backed by a survey of people -- it is not my individual view point!
The numbers you mentioned refer to the cost of expanding any ATM and POS network - whether the ATM or POS being Aadhaar/biometric enabled or not. So, I have said that the issue about Aadhaar ATM and POS costs in this article is NOT supported by the information being presented.
How is that simple matter of fact resolved by referring to AIBEA and an MP?
I'm not running down the effort. The case you are trying to make about rising bank charges is an important one. I'm only asking for the case to be supported by relevant information so that it cannot be shot down so easily.
That is the simple point of my comments. Hope that clarifies.
If it is matter of not getting the information after making a BIG effort, make that the issue. Govt and banks should not be allowed to ride roughshod over people.
By this way we can avoid ATMs and save money also.
Please read what you have written and then re-read the article. There is no contradiction. We are saying dont use us to propogate your subsidies. But easier to jump to conclusions and comment without understanding, right?
When the UPA govt can have many controversial bills (like the Food Security Bill) passed in parliament, why hasn't it tabled a bill to make UIDAI a statutory body which will authorize it to provide the UID No. to all residents of India ? Surely the govt is not telling us the real reasons !