One Billion IDs – Then What? Aadhaar, India’s Universal Identification Program, Delivers Real Benefits for Indians

January 2015

Copyright (c) 2015 Unitus Seed Partners LLC 2

Forward

A few years after the concept of Aadhaar, India’s unique identification (UID) program, was

first discussed, the government appointed Nandan Nilekani as Chairman of the Unique

Identification Authority of India (UIDAI) in 2009. Utilizing biometric data, the Aadhaar

program is expected to serve as a primary resource for delivering welfare services more

efficiently. In early September 2014, Prime Minister Narendra Modi set a goal of universal

coverage of all Indians under Aadhaar by June 2015. Current estimates of coverage as of

January 2015 are above 74 crore (740 million), with approximately 45 crore (450 million)

still awaiting their Aadhaar ID. While the government actively pursues its ambitious target,

the Aadhaar program is increasing access to direct benefits for Indian citizens as well

creating potential market opportunities for startups serving the masses throughout India.

This report provides a better understanding of the Aadhaar program as well as addresses

key benefits directed towards Indians, such as increased access to health coverage, banking,

food grain supplies, and more. Further, it also explores potential opportunities for startups

to utilize Aadhaar-based technologies as a means of positively impacting the masses

throughout India.

We hope you enjoy!

Unitus Seed Fund Team

About Unitus Seed Fund

Unitus Seed Fund is India’s most active seed impact investor, funding startups that leverage

market forces to benefit the masses in India. Unitus Seed Fund plans to grow its portfolio of

16 companies to at least 30 startups in sectors including agriculture, healthcare, education,

livelihoods, technology, and access to basic necessities. Unitus Seed Fund is part of the

Unitus Group, a successful financial services group operating in multiple emerging markets

since 2000. Unitus Seed Fund has offices in Bangalore and Seattle.

Learn more about Unitus Seed Fund: http://usf.vc

Visit Unitus Seed Fund Research: http://usf.vc/research

Copyright (c) 2015 Unitus Seed Partners LLC 3

Table of Contents

Aadhaar/UID is Unlocking Opportunities in India 7

Looking Behind the Aadhaar Curtain 11

MongoDB: Aadhaar’s Original Database Management & Analytics Partner 16

Smart Identity Devices (Smart ID): Aadhaar’s Biometric Startup Pioneer 19

Will Aadhaar Change India? 23

Copyright (c) 2015 Unitus Seed Partners LLC 4

IDENTIFYING OPPORTUNITIES IN INDIA

Aadhaar, India’s Universal Identification (UID) Program, Delivers Real Benefits

and Market Opportunities for Startups

Unitus Seed Fund is a venture capital fund that invests in startups that benefit the masses

and ultimately seeks to impact over 100,000 families in 5 years. With the rise of the

Aadhaar identification program comes the potential for citizens to receive direct benefits

such as increased access to banking services, universal healthcare, foodstuffs, and more.

Unitus Seed Fund believes that significant opportunities also arise in conjunction with the

growth of the Aadhaar program that have the ability to positively impact Indian lives

through disruptive and innovative startups.

This report includes 5 articles on Aadhaar and its potential impact on the overall well-being

of the Indian population:

1. Aadhaar/UID is Unlocking Opportunities in India

2. Looking Behind the Aadhaar Curtain

3. MongoDB: Aadhaar’s Original Database Management & Analytics Partner

4. Smart Identity Devices (Smart ID): Aadhaar’s Biometric Startup Pioneer

5. Will Aadhaar Change India?

Copyright (c) 2015 Unitus Seed Partners LLC 5

This first article provides background on the Aadhaar/UID program and its ability to

unleash opportunity throughout India. The next two articles look behind the Aadhaar

curtain and delve into some of the program’s more specific underpinnings and analytics.

The following articles focus on examples of startups and market opportunities that we

believe have the potential to effectively utilize Aadhaar to reach a larger consumer base.

Copyright (c) 2015 Unitus Seed Partners LLC 6

AADHAAR/UID IS UNLOCKING OPPORTUNITIES IN INDIA

India’s Aadhaar (aka Universal Id) is creating a new platform that

entrepreneurs can leverage to create new services to reach the masses in India

With the Union Budget for 2013, the Indian

government doubled its spending to a massive INR

2,620 crore (USD 436 million) in 2013-14 on the

Unique Identification Authority of India’s (UIDAI)

Aadhaar program. Why would the government of

the largest democracy, with a population of over

122 crore (1.22 billion), battling issues like rampant corruption, non-availability of primary

healthcare to everyone, inequalities in education, poor infrastructure etc. spend so heavily

on issuing “Unique Identification” cards to its people? Will issuing additional identification

cards deliver real benefits to the 86% Indians currently living below the poverty line?

Indians already have multiple government issued identity cards - Ration Card, Passport,

Voter ID and PAN card to name a few. Each of these serves a different purpose but despite

having so many cards access to basic services and benefits has been a challenge. Try

getting a postpaid mobile SIM card for yourself and you will experience the challenges first

hand! On the other side of the spectrum, Aadhaar is now intended to be used as a means of

streamlining passport verification in order to ensure more transparency and reduced travel

delays. While having a Unique ID today does not end all their troubles, a few years from now,

it is expected to make things a lot easier for millions of lower-income Indians.

Aadhaar has already started to make a difference with the “Direct Cash Transfer” scheme

rolled out in phases beginning 1st January 2013. Direct benefits transfer for the cooking gas

subsidy recently crossed 20 lakh (2 million) electronic transactions worth INR 81.5 crore

(USD 13.5 million) for 11 lakh (1.1 million) households. Integrating Aadhaar and direct cash

transfer is expected to eliminate the estimated 15 per cent leakage due to problems in

identification and generate savings of around 0.5 per cent of GDP (INR 56,859 crore in

terms of estimated GDP for 2013-14 - INR 1,13,718,86 crore). Over 31 crore (310 million)

Indians already have cards today and over 10 lakh (1 million) people enroll every day.

Copyright (c) 2015 Unitus Seed Partners LLC 7

The Unique Identification number (UID) program, branded as “Aadhaar” (which translates

to 'foundation' or 'support)', was primarily intended to “include” close to half of India’s 1.2

billion+ population who are today excluded from the formal economy. Absence of uniform

processes and a single identification delays (and sometimes even prevents) this population

getting access to basic services and benefits like banking, pensions, insurance, food grain

supplies etc.

The aim of the UID program is to bring efficiencies in distribution of services, to enable

choice to all Indian residents and to provide for better oversight. Public and private

services that use Aadhaar’s verification mechanism can realize significant cost savings

through efficient delivery of their services that reach the right beneficiaries.

Every resident gets enrolled by providing basic identification details along with finger

prints and iris scans. A unique number called the “Unique ID” is allocated to the

resident. The data captured is de-duplicated and is securely maintained. Enrolling the 122

crore (1.22 billion) population is a mammoth activity and to enable quicker deployment,

this has been decentralized by involving private contractors.

The UIDAI’s database also allows for authenticating a resident enrolled in the system. The

system even defines methods and processes that can be used to measure the quality of

Copyright (c) 2015 Unitus Seed Partners LLC 8

service while using the authentication mechanism. Opportunities leveraging the UID

database can be classified into three main categories – enrollment, development of

biometric data capture devices and applications.

1. Enrollment services: Private parties can, on fulfilling certain requirements, take up

contracts with the government to conduct the enrollment.

2. Development of single and multi-function entry devices with support for peripherals

3. Development of applications: The e-authentication service provided can enable a wide

range of applications. Public distribution services and subsidies, security systems,

ticketing, visa issuance, payment systems, banking and telecom applications are some

obvious examples. We will cover these and other applications in detail in a follow on

blog post.

The first two categories mentioned above have robust competition and industry

involvement already but building applications around the UID database presents

tremendous opportunities.

While the opportunities are huge, there are many challenges to deploying a UID based

system. Any service using the authentication mechanism requires system integration effort.

Availability of devices that support entry of biometric data and the enrollment of the target

resident population are some of the critical challenges. Additionally, legacy systems need to

be replaced with newer ones (both Hardware and Software) and there is always lethargy to

adopt any new system especially when it replaces the process flow end to end. It remains to

be seen how many smaller players can cash in on such opportunities as opposed to larger

enterprises with better system integration capabilities and stronger cash positions. Aside

from the technological challenges, it also remains to be seen how the adoption will be

accepted especially since shifting to Aadhaar brings in transparency to the system.

As investors in the Indian ecosystem, we are definitely excited about the scale and potential of

opportunities presented by Aadhaar. We’re actively seeking great entrepreneurs who are

building new startups around Aadhaar, or who plan to enhance their current business by

adopting or integrating Aadhaar-based technologies and services. Do reach out to us if you are

an entrepreneur or you know one working in this space.

Copyright (c) 2015 Unitus Seed Partners LLC 9

LOOKING BEHIND THE AADHAAR CURTAIN

As a result of Aadhaar, India will become a hotbed for new startups and

investment opportunities serving India.

Many would argue that Aadhaar (also known as UID or Universal Id) is one of India’s most

revolutionary and impressive technological endeavors in recent history. What other

technology or service has shown such impressive growth from zero to over seventy-four

crore (740 million) users in under five years? Read more about Aadhaar in general here.

Aadhaar is a program to assign a 12 digit individual identification number to all Indian

citizens. Aadhaar is issued by the Unique Identification Authority of India (UIDAI), which

serves as a proof of identity and address anywhere in India, is free of charge, and will be

unique to an individual and will remain valid for life.

As a result of Aadhaar, we strongly believe India will be a hotbed for new startups and

investment opportunities in the coming years. The Aadhaar data process is complicated;

however, we have researched and created the following graphic to diagram how the

Aadhaar system works and to identify the seven stages of Aadhaar’s value chain and

potential areas that may be attractive for breakout startups and opportunistic venture

capitalists to investigate further:

Aadhaar Value Chain

1. Enrollment registrars / agencies

An enrollment registrar is usually a local organization that is authorized by the UIDAI to

enroll and grant Aadhaar UID numbers to citizens. In most instances, a registrar is an

organization or department related to the State Government or Union territory, the public

Copyright (c) 2015 Unitus Seed Partners LLC 10

sector, or one that frequently interacts directly with citizens for its business operations.

Example registrars are the Rural Development Department, select insurance companies,

and banks.

In addition to registrars, there are enrollment agencies that reside under the umbrella of

their respective registrar. Enrollment agencies are typically considered the first stage of the

Aadhaar value chain because they are the authorized outlets that collect the demographic

and biometric data from the people in order to enroll them to Aadhaar. For these agencies

to have continued authorization to operate as an enrollment post, they must be under

empanelment by the UIDAI. As of March 2014, there are approximately 130 agencies

empanelled for undertaking enrollments for the Aadhaar UID project. These ~130 agencies

meet the minimum requirements for eligibility and are the only qualified agencies for

citizens to receive their Aadhaar UID.

2. Enrollment devices and supporting peripherals

In order to be a working agency, every enrollment agency is required to have certified and

trained employees and authorized hardware, such as laptops, computers, printers, certified

biometric scanning devices for fingerprint and iris capture, and cameras for facial photos.

These devices must be certified by UIDAI or another authorized organization. The agency

must also ensure continued technical support by its hardware suppliers. These biometric

devices and cameras are responsible for collecting the unique data required to receive an

Aadhaar number. As a result, the enrollment devices and supporting peripherals are

considered to be the second stage of the Aadhaar value chain.

There are approximately fourteen certified vendors that currently supply biometric iris and

fingerprint scanning devices to aid all Aadhaar efforts across India. Those fourteen vendors

are 4G Identity Solutions, BioEnable Technologies, BioMoRF Systems, Cross Match

Technologies, Delta ID, e-Smart Systems, HCL Infosystems, Inspira Biometrics, Precision

Infomatic, Safron Morpho, Smart Chip, Smart Identity Devices, Swathy Smart Card Hi-Tech,

and TeraSoftware.

Copyright (c) 2015 Unitus Seed Partners LLC 11

3. Enrollment software

The “Aadhaar Enrolment Client” is the enrollment software that agencies and registrars

utilize, which continues to be developed by UIDAI. Each software client needs to be

registered with the Central Identity Data Repository (CIDR), which is the centralized

database that stores all Aadhaar data. The software processes fingerprint and iris scans,

facial photos, and demographic information. The scanned data along with the application

form is sent to appropriate authorities for verification and final processing, which typically

takes approximately three months to fully process. As a result, the enrollment software is

considered the third stage of the Aadhaar value chain that works concurrently with the

enrollment devices and data storage units.

Mahindra Satyam of Satyam Computer Services, a leading global consulting and IT services

provider, is responsible for developing the system processes that ensure each Aadhaar

number is unique by going through the entire Aadhaar database and checking for duplicate

UIDs.

4. Data storage

UIDAI stores identities in its main database server called the Central Identity Data

Repository (CIDR). Each Aadhaar number is linked to an individual’s unique biometric and

demographic information. The CIDR is the largest biometric database in the world. As of

January 12, 2015, it holds about 10+ Petabytes of data consisting of approximately 740

million people and their 7.40 billion fingerprints scans, 1.48 billion iris scans, and 740

million facial photos. The Aadhaar program is projected to reach India’s entire population of

1.25 billion and store ~20 Petabytes of data by early 2016.

The approved vendors that are most involved in Aadhaar’s data storage are Bharti Airtel,

National Informatics Centre Services, and Wipro for supplying blade servers, data storage

space, and the installation and commissioning of server hardware and software. The

Standardization Testing and Quality Certification Directorate office is responsible for

auditing the data within the CIDR. These vendors are considered to be the primary players

in the data storage stage of the Aadhaar value chain.

Copyright (c) 2015 Unitus Seed Partners LLC 12

5. Data management and security

The UIDAI guarantees the safety and security of the biometric data it houses. The data is

encrypted to a high degree to prevent unapproved access by third parties as it is being

communicated between servers and devices. “The UIDAI has taken several measures to

ensure security of resident data, spanning from strong end-to-end encryption of sensitive

data, use of strong PKI-2048 encryption, use of HSM appliances, physical security, access

control, network security, stringent audit mechanism, 24x7 monitoring, and measures such

as data partitioning and data encryption.” (Full details here) Surprisingly, the CIDR is not

connected to any other database. The data housed in the CIDR actually never leaves the

database. When any system at a Point-of-Service, such as a bank or retail outlet, requests

UID validation and authentication from the Aadhaar database, the Aadhaar system does not

actually send back UID data. Instead, the request is confirmed or rejected by the database,

and only the confirmation or rejection is sent back to the requester. Therefore, no

proprietary data leaves the database.

The vendors that are most involved in data management and security stage of the Aadhaar

value chain are Mindtree, HCL Infosystems, and Tata Consultancy Services.

6. Data processing and analytics

Analytics and reporting are essential to Aadhaar’s mission and goals. It has been a core

focus of Aadhaar from its inception. By processing and performing analytics on the Aadhaar

data, the UIDAI is able to produce metrics that support Aadhaar’s efforts and insights that

the UIDAI can use to educate the public and further develop and improve the Aadhaar

program.

Hadoop is the primary analytics and reporting platform that is used for the data processing

and analytics stage of the Aadhaar value chain. Hadoop receives encrypted data packets

from registrars and agencies and the large volume of data is supported and validated by

Copyright (c) 2015 Unitus Seed Partners LLC 13

various other vendor programs, such as MongoDB, MySQL, and RabbitMQ.

7. Aadhaar UID applications (products, services, etc.)

The potential products and services offered by new and existing companies based off

of Aadhaar UIDs are limitless. Aadhaar UID applications can augment or, in some

cases, disrupt all sectors, including agriculture, communications, education, financial

services, food and drink, government, healthcare / medical / pharmaceuticals,

logistics, and retail. Already, we are seeing Aadhaar-based product and service

innovations, primarily focused on government, communications, and financial

services.

The most well known application of Aadhaar UIDs is the Aadhaar-enabled Payment System

(AePS). This system essentially allows anyone with an Aadhaar number to go to a micro-

ATM and check their balance, withdraw money, deposit cash, and transfer funds to another

person with an Aadhaar number. The AePS also allows the government to send welfare

electronically to beneficiaries who may not have previously had bank accounts.

Aadhaar is an ambitious program with a lot of data to be collected. The following section of

this Aadhaar report explores the database management and analytics software providers

that are keeping the initiative streamlined and organized in order to ensure the program is

able to perform to its utmost potential.

Copyright (c) 2015 Unitus Seed Partners LLC 14

MongoDB: AADHAAR’S ORIGINAL DATABASE

MANAGEMENT & ANALYTICS PARTNER

As Aadhaar continues to enroll thousands of Indians each day and add terabytes

of data to its Central Identity Data Repository, MongoDB and other data

management and analytics software providers continue to produce insights

that will aid Aadhaar and the lives of millions of Indian citizens.

In November 2013, it was announced that MongoDB’s CEO, Max Schireson, was in New

Delhi to complete talks with the Unique Identification Authority of India (UIDAI) in order

for MongoDB to be one of the approved partners for the Aadhaar program. MongoDB Inc.,

formerly known as 10gen prior to its name change in August 2013, is a software company

founded in 2007 in the United States that is most well-known for its product, MongoDB, a

cross platform NoSQL database. MongoDB’s customers include companies such as Disney,

the New York Times, Cisco, MTV, Forbes, Craigslist, ADP, AstraZeneca, FourSquare, IBM,

Intuit, Microsoft, McAfee, UnderArmour, and eBay. According to DB-Engines.com, and

Japersoft, MongoDB is the most popular NoSQL database management system today and the

fifth most popular database management system, preceded by Oracle, MySQL, Microsoft

SQL, and PostgreSQL.

MongoDB is an example of a startup company that leverages its expertise in data

management, processing, and analytics to provide services to UIDAI’s Aadhaar program

across the fifth and sixth stages of Aadhaar’s value chain (See further details of Aadhaar’s

entire value chain).

Aadhaar chose to partner with MongoDB (in addition to other vendors such as Hadoop,

MySQL, HBase, and Solr) for several reasons. First, MongoDB increases database efficiency

with its NoSQL approach, which enables Aadhaar to capture, process, search, and analyze

large unstructured datasets faster than most other management software would allow.

Second, MongoDB can efficiently store large volumes of biometric data and images, whereas

many other management systems, such as MySQL, are less suited for image storage. Third,

Aadhaar’s data processing analytics cannot depend solely on a single software supplier. As a

result, UIDAI diversified its systems reliance across multiple vendors and leverages each

Copyright (c) 2015 Unitus Seed Partners LLC 15

vendor’s strengths. Aadhaar has therefore been less dependent on MongoDB and has

decided to share more of the data processing volume with its other management vendors.

Nonetheless, MongoDB has been performing well financially and has gained the attention of

many venture investors over the years, including NEA, Sequoia Capital, Flybridge Capital

Partners, Union Square Ventures, In-Q-Tel, Intel Capital, Salesforce.com, Red Hat, T. Rowe

Price, Fidelity, and Altimeter Capital. In its most recent venture round in October 2013,

MongoDB had a valuation of approximately $1.2 billion.

Although MongoDB’s sales have never been released, in May 2012 sources stated that the

company’s quarterly sales growth over five quarters averaged about 50 percent, suggesting

an annual growth rate of ~400%. Lastly, a report by Wikibon estimates that MongoDB’s

sales in 2012 were approximately $40 million, which is in line with statements that mention

the company’s current sales are in the “tens of millions” and sales could potentially more

than double by 2014-15. In addition, MongoDB’s staff continues to show strong growth in

numbers from 100 employees in 2011 to having about 400 employees now.

Copyright (c) 2015 Unitus Seed Partners LLC 16

With its sights on expanding into Asia-Pacific, Australia, and Europe, MongoDB’s

partnership with Aadhaar makes sense financially as well as strategically to prove to

potential customers that they can handle even the largest of data sets such as those housed

in Aadhaar’s Central Identity Data Repository (CIDR). With strong momentum and

promotions from its current customers, market leadership of approximately 3x over its

closest (NoSQL-based) competitor, and investments from some of the world’s most

successful venture capital firms and technology companies, MongoDB is positioned to

succeed in the coming years as it continues to support Aadhaar, the program’s profound

efforts, and future startup companies founded on Aadhaar’s data.

Along with MongoDB, Aadhaar is further supported through data collection by tech

companies, such as Smart ID, and together they are raising the bar for biometric data

collection. The following article explores Smart ID’s role in developing the UIDAI’s Aadhaar

initiative.

Copyright (c) 2015 Unitus Seed Partners LLC 17

SMART IDENTITY DEVICES (SMART ID): AADHAAR’S

BIOMETRIC STARTUP PIONEER

Experiencing phenomenal growth driven in large part by the rapid and large-

scale deployment of Aadhaar, India's biometrics market may reach $2 billion by

2018.

Aadhaar has now existed for more than five years and in that period, the Planning

Commission of India and its Unique Identification Authority of India have enrolled more

than 700 million people into the program, each with a their biometric identity. Although

there are some major opponents of the Aadhaar program, it seems that the majority of

opinion leaders strongly advocate the program and its potential to improve national

security and welfare as well as decrease poverty and corruption by linking unique IDs to

passport numbers, driver’s licenses, bank accounts, voter IDs, etc. One of the most pressing

issues today for many of India’s citizens is proof of identification. Without that proof, many

citizens are denied basic benefits, such as government welfare and subsidies.

The foundation of the Aadhaar program is based on biometric and demographic data that is

unique to each citizen. This data can only be collected by leveraging biometric devices and

compatible software – the second and third stages of the Aadhaar value chain.

Smart Identity Devices, or Smart ID, has been the biometric pioneer and leader for the

Aadhaar program. Smart ID provides biometric technology, smart card, and information and

communication technology products and services for numerous sectors, such as financial

services, logistics, government, and IT security. Launching commercial operations in 2008,

Smart ID is based in Noida, India and is led by Sanjeev Mathur. Through an exclusive

partnership with Cross Match Technologies, a German manufacturer of biometric finger-

print scanners and iris cameras, Smart ID has become a leader in advanced biometric

Copyright (c) 2015 Unitus Seed Partners LLC 18

technology and its biometric technology was first to be certified by the Standardization,

Testing, and Quality Certification (STQC) organization and is now being used by enrollment

agencies across India for the Aadhaar program.

Smart ID’s products and services range from biometric products, to mobile application

solutions, to services such as Aadhaar enrollment, training, project management, IT hosting,

and business correspondent management. Smart ID primarily markets three biometric

products: its PatrolID, I SCAN 2, and Smart Enrollment Kit. The Patrol ID is based on Cross

Match’s Guardian F product, which is known for its tough, durable, and long-lasting qualities.

The Patrol ID and I SCAN 2 utilize Cross Match’s Auto Capture technology to take fast, high-

quality images with minimal operator involvement.

The low-cost and lightweight Patrol ID fingerprint scanner is specifically designed to cater

to large-scale initiatives, such as Aadhaar, to be used frequently and in a variety of

environments. The I SCAN 2 is also a lightweight, compact dual iris scanner that be utilized

in multiple settings, whether it is outdoors, indoors, dry, or humid conditions. The Smart

Enrollment Kit is a lightweight all-inclusive kit that has a laptop computer, facial camera,

iris camera, fingerprint scanner, printer, backup power supplies, data storage devices, and

cleaning supplies. The Smart Enrollment Kit is one of the most popular biometric kits in

India due to its portability, ease of use, and flexibility.

Smart ID not only functions as a supplier of cutting-edge biometric devices, but also acts as

one of the most respected enrollment agencies empanelled by the UIDAI for the Aadhaar

program. Smart ID is able to carry out enrollment activities across India in states such as,

Jharkhand, Tamil Nadu, Orissa, Uttar Pradesh, West Bangal, and Madhya Pradesh. Smart ID

has already enrolled more than 1.2 million citizens into the Aadhaar program through its

enrollment agencies. In July 2011, the UIDAI recognized Smart ID as being one of the three

best enrollment agencies in Aadhaar for enrolling more than 25 million citizens in a very

short time frame through its highly efficient and well-engineered enrollment process and

minimal data entry error rate of 0.8%. With Smart ID’s continued success in both its

products and services, Smart ID seems to be in strong position to continue its track record

as a leader within the growing Indian biometric market.

Copyright (c) 2015 Unitus Seed Partners LLC 19

The Indian biometric device market has been showing strong growth due to increased

usage driven by population growth, positive trends in IT security, homeland security, and of

course, government initiatives such as Aadhaar, e-passports, smart cards, driver’s licenses,

micro-ATMs, benefit programs, and the Smart Safe City project, which requires advanced

systems and management solutions across various levels of a city’s infrastructure to be

deployed. The biometrics market is composed of numerous devices such as fingerprint

scanners, iris scanners, facial cameras, and biometric recognition systems. According to a

recent study by Research and Markets, India’s biometrics market is forecast to hit about $2

billion by 2018. Although there are a number market drivers supporting this growth,

especially the Aadhaar program, the challenges that may continue to exist for this market

are implementation of biometrics technology at levels beyond government and enterprise

as well as the current, albeit decreasing, high cost of production (the current price of a

Smart ID Patrol ID fingerprint scanner is approximately $2300).

As a result of the historical growth of the biometrics market and the continued growth

prospects, there seems to be increasing competition in the space from new startups as well

as incumbent players that have revamped their focus on launching new, innovative

technologies. Smart ID’s largest competitors in the Indian biometrics space are 4G Identity

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Solutions, Bioenable Technologies, Biomorf Inspira, Morpho Safran, and a few others that

each have their own biometric devices and related service offerings as well as being

certified vendors for the Aadhaar program. In addition to local competitors, international

competitors are also fringing on the Indian biometric market. Due to a lack of international

biometric standards and the novelty of biometric devices in India, many Asian biometric

manufacturers are releasing cheaper and low-quality devices to the Indian market to

compete with local players and attempt to steal customers. Smart ID has many customers

across multiple sectors for these new entrants to go after. Smart ID customers include Tata

Consultancy Services, HCL, Wipro, the UIDAI, Trimax, Transline, Comat, and BLS

International.

Aadhaar may be India’s greatest technical and social endeavor in recent history. It has been

met thus far with no shortage of controversy or praise. However, the Aadhaar program

would not have been possible without the strong partnerships by leading biometric device

suppliers, like Smart ID. Smart ID is one of the youngest companies to be partnering with

Aadhaar, yet it is the one that seems to be leading the pack. India’s biometric device market

is crowded and there are many companies throughout the world that are fighting to gain

traction in the market. As a result, although the biometrics market may not be the best

space for startups to focus on, due to high competition and capital expenditures costs, there

is potential for add-on and adjacent products and services to flourish.

Copyright (c) 2015 Unitus Seed Partners LLC 21

WILL AADHAAR CHANGE INDIA?

The Momentum of Aadhaar, India’s Universal ID System, is Increasing

India has a population of approximately 1.25 billion people today; however, the country

does not have a formal system of universal identification for each of its citizens, analogous

to a Social Security Number in the United States. As result, when individuals across the

nation attempt to open a savings account, apply for a loan, purchase a mobile phone, or

even try to request a passport, many of them are unable to do so because they lack proper

identification records and proof of citizenship. The Unique Identification Authority of India

under the Planning Commission of India embarked on a mission in 2009 to solve this

overrun issue with the Aadhaar program.

As of January 2015, The Aadhaar program has now enrolled more approximately 740

million citizens in under five years– granting citizens unique identification numbers (linked

to their demographic information and biometric data) that will empower them to lead

better lives by accessing products and services that may not have been available before.

Aadhaar Service Opportunities: Education, Healthcare, Communications, and

Financial Services

Unitus Seed Fund believes that the Aadhaar program and the propagation of universal

identification numbers to all Indian citizens will bring new frontiers of technological

innovation throughout India’s economic sectors. As a result, Unitus Seed Fund is excited to

watch as new startups disrupt their respective sectors. Although there are numerous

sectors in India that will thrive with these new, exciting companies and will have Aadhaar

numbers as an essential component of their inner workings, we believe that four particular

sectors have the highest proclivity for early disruption over others. These four sectors are:

education, healthcare, communications, and financial services. In this article, we have

outlined the opportunities for how companies can disrupt and contribute to each of these

four sectors by using Aadhaar and its universal identification numbers.

Copyright (c) 2015 Unitus Seed Partners LLC 22

Education: longitudinal tracking and direct payments

The education sector, which broadly incudes K-12 and university education as well as

vocational training, is perhaps the most basic and essential sector that Aadhaar can improve

via a fundamental disruption: long term tracking of results. India currently lacks a formal

system of tracking a person’s school record or employment history. As a result, the

academic performances of Indian students have limited documentation and are not tracked

over a student’s career, those that are tracked cannot be verified, and service providers and

employers in India’s job market lack a high level of efficiency to properly match the most

qualified job candidates of specific skills sets to the jobs that most require candidates with

those qualifications.

India’s youth is increasingly mobile, moving with their parents as they seek economic

opportunities, and moving to larger towns and cities to get better educational opportunities.

An Aadhaar-linked academic record can enable each new school to be confident that it

knows what previous education any student has received prior to attendance. As a result,

policy makers and curriculum designers can track academic results of students over time,

even as they move between different school systems in different states, in order to

determine the outcomes of various improvements made to educational systems at the local

or national level.

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Aadhaar’s unique identification numbers can also be used by the vocational education

sector essentially as a tracking mechanism that can link to a record of a person’s vocational

skill set as well as his or her academic and employment history. For example, a mechanic

who specializes in a specific field will be able to charge the proper fees for being the most

qualified mechanic to best diagnose and fix a problem. By having the ability to track the

academic and professional history of each person and increase the efficiency of the

matching process in the job market, it will ultimately incentivize citizens to lead more

productive careers because candidates will be able to finally prove their knowledge, skill

sets, experiences and thereby be compensated accordingly.

In August 2013, the Indian Government launched a new program called the National Skill

Certificate and Monetary Reward scheme through a training company, Centum Learning. In

order a stronger skilled and employable workforce, this new scheme grants government

monetary rewards, called Standard Training & Assessment Rewards, to its program

graduates. “Training programs under the scheme are intended to develop and certify skills

against industry standards. The assessment and certification processes involved are based

on rigorous norms as per National Occupational Standards… Under the scheme, Centum

Learning offers skills training on Industry recognized courses in order to orient and skill the

youth on diverse job roles across priority employment sectors including, Sales in Telecom

and Organized Retail, Customer Service skills in BPO, Telecom Installation & Fault Repair,

Telecom Tower Equipment Operations & Maintenance, Gems & Jewelry, etc.” The rewards

are directly transferred to the graduates’ Aadhaar-based bank accounts. Therefore, in order

to be a part of this program, the government requires that each candidate be enrolled in

Aadhaar.

By leveraging Aadhaar in such a way to electronically store academic and employment

histories and fully incentivize productivity in the workforce through appropriate

compensation in addition to supporting government programs, the growth of India’s

economy will accelerate.

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Healthcare: durable and complete electronic medical records

With the ultimate goal of universal healthcare for all Indians, the healthcare sector is the

second sector that will be disrupted by Aadhaar. Today, thousands of births each day in

India are unregistered and these citizens continue living their lives with no formal

identification records and no official medical history. The ramifications of not having a

database of medical histories or at least a system to track medical records are the inability

to properly diagnose patients, run robust statistical analyses to track and predict general

health indicators and disease outbreaks, as well as the inability to efficiently allocate private

and public funds. In addition, the government and private payers are unable to properly

assess the individual risk factors of patients because of the lack of health information. As a

result, patients who lead healthy lives and are in good standing can rarely be differentiated

from those who have led unhealthy lives. Individuals are in turn charged insurance rates

that do not match their actual health risk levels; ultimately, the lack of medical histories

leads to a decrease in the affordability and accessibility of medical care for many of India’s

people.

With the advent of Aadhaar, medical professionals will be able to track and analyze an

individual’s medical history from her birth by linking all of her medical proceedings to her

Copyright (c) 2015 Unitus Seed Partners LLC 25

Aadhaar number. By doing so, a medical database is created that can be accessed by the

government, medical insurance companies, and medical providers, all adhering to

appropriate privacy and use policy rules of course. By having this form of electronic medical

records (EMR) in place, the government and medical insurance companies will be able to

fully assess the risk factors of a patient as well as a population of patients, charge proper

insurance rates, and grant government welfare benefits to those that need it most. In the

long run, healthcare will be attainable to more Indians and doctors will have more

information to better treat patients and decrease the likelihood of misdiagnoses, medical

errors, and the risk of disease.

The intersection of the healthcare and communications sectors is one that is especially well

suited for disruption by utilizing Aadhaar. Similar to how in the United States, mobile

healthcare and medical compliance are beginning to gain traction as electronic medical

records across various databases are merging, treatments are being tracked through mobile

devices, and data is being sent through the cloud, India will be able to create a flexible,

robust EMR database through Aadhaar. As a result, medical professionals will be able track

their patients’ medical compliance through mobile devices and in the long run, the general

health of patients will likely increase.

Communications: reduced friction, lubricated by identity and money

The communications sector is the third sector that will be disrupted by Aadhaar.

Specifically, the accessibility of mobile phones and the number of mobile phones in use in

India will increase even further beyond current astronomical levels. In order to receive a

mobile phone in India a valid form of identification is required – and as discussed earlier,

many citizens lack official identification. Today however, any citizen can use his or her

Aadhaar number as a form of identification to receive a mobile phone.

As mobile phones further penetrate the Indian population and the number of Aadhaar-

based mobile applications increases, the frequency of electronic and mobile transactions

will increase. One of the largest opportunities is in mobile financial transactions. India’s first

and largest mobile payments solutions provider is Oxigen Services and their premier

product is the Oxicash, a closed money e-wallet. “OxiCash is unique cash based online

payment solution which is aimed at customers who use cash to make payments. It is a

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prepaid stored value virtual wallet where the consumer’s mobile number is the identity. It

is unique payment solution developed by Oxigen which is completely secure.” With Aadhaar

and the rise of mobile phones, Oxigen is looking to take its annual revenue of

approximately $660 million (4000 crore) and increase it by more than 40% per year.

When consumers have easier access to mobile devices integrated with secure mobile money,

like Oxicash, they will be able to make remote purchases, send money to relatives in distant

locations, and ultimately become equal members of the digital economy, similar to what

high income consumers with credit cards and bank accounts enjoy today.

Financial services: credit histories and direct transfers create opportunity

The financial services sector is the final sector that United Seed Fund believes will be most

immediately disrupted by Aadhaar. By not having a formal form of identification, most

citizens lack access to basic banking services, such as a savings and checking account. As a

result, many Indians go through their lives without credit histories, the ability to make a

remote payment via check or wire transfer, or the ability to take out loans from qualified

debtors. Instead, many Indians borrow money from family, friends, and loan sharks who

charge extremely high interest rates. With Aadhaar acting as a universal identification

system, citizens will be able to open bank accounts, build a credit history, and have access to

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these basic banking services. By building a credit history, Indians will be able to take out

loans from financial institutions, buy homes, and establish new businesses.

With the rise of mobile banking, citizens will be able to send money to each other through

peer-to-peer transactions, complete electronic/mobile payments to businesses through

their phones, and receive government welfare benefits directly to their Aadhaar-linked

bank accounts. Today, the government sends qualified Aadhaar enrollees Direct Benefit

Transfers through their Aadhaar numbers. Welfare beneficiaries withdraw money from

micro-ATMs, which only require an individual’s biometric information with his or her

Aadhaar number for confirmation.

Moving forward

Aadhaar is a still a young program that continues to enroll millions of individuals each

month. Aadhaar will become a platform for new and existing companies to build and offer

exciting products and services to enhance the lives of millions in India. Although we only

discussed four sectors in this article, it is clear that Aadhaar-based products and services

will be offered in some fashion in every sector of the economy.

Conclusion: Big Opportunities for Startups Serving the Masses

We hope that this report was able to provide a better perspective on the current progress

and potential for the Aadhaar program in India. In this report, the main topics covered

ranged from a basic understanding of Aadhaar and UID, a more in-depth look at the

underpinnings of Aadhaar’s database management, MongoDB, and potential opportunities

for Indian startups to best utilize Aadhaar in order to maximize impact.

If you are building a product or service that is based on Aadhaar, Unitus Seed Feed wants to

speak with you. We believe that today, Aadhaar will do for India’s economy what

smartphones did to the global economy ten years ago. We believe that Aadhaar-based

startups can not only disrupt the Indian economy, but also profoundly empower millions of

Indians and improve their livelihood and well-being.