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Authentication » Aadhaar & Financial Inclusion » Aadhaar Authentication for Financial Transactions

Aadhaar Authentication for Financial Transactions


One of the other challenges the resident frequently faced was to establish his/her identity. The problem gets further complicated owing to the fact of using proxy documents and circulation of counterfeit documents in the country, which leads to lack of trust between service providers and the resident. However, with Aadhaar’s property of Authentication enables an Aadhaar holder to authenticate with a service provider Anytime, Anywhere in the country to prove his/her identity. To facilitate this, UIDAI has established an ecosystem based on best global practices to ensure data privacy and reliability of authentication, with UIDAI being agnostic to the fact as to why was the authentication done.

UIDAI facilitates on-line verification (Authentication) of a person’s identity through various means (Biometric – Fingerprint and Iris, demographic, and One Time Password to registered mobile phone or email id). Some of the key benefits of UIDAI authentication for various stakeholders from financial sector perspective have been listed below:

  • Ease of access to make financial transactions
  • MicroATM based AEPS will ensure increased number of active bank accounts thus aiding financial inclusion
  • Availability of microATMs in the village will save residents a trip to bank branch and thus reduce their travel costs and opportunity costs.
  • Online nature of microATMs provides resident access to their funds not only from their village, but also outside
  • Will potentially reduce time delays for government payments significantly
  • Reduces the involvement of middlemen to receive their welfare payments
Government Departments
  • Aadhaar authentication ensures that funds reach only the intended beneficiary and in turn lead to better targeting
Reserve Bank of India & Banks
  • Reduces transaction cost and cost of extension of services to unbanked areas for banks
  • Integrated Authentication in the microATM devices enables banks to rely on Business correspondents (BCs) to reach unbanked population, eliminating the need for a physical bank branch or ATMs in remote areas
  • Will provide an impetus to electronic payments and thus reduce cash management costs to banks
  • Increased number of Aadhaar linked micropayments will increasingly make the proposition profitable for banks
  • Use of Aadhaar Enabled Payment System would help achieve stated purpose of improving delivery of welfare services

To standardize the infrastructure, system requirements, privacy norms and quality of services, UIDAI has published MicroATM Standards which have been accepted by Indian Bankers Association (IBA). The latest MicroATM standards can be found on the reference links below. In order promote the usage of MicroATM, UIDAI initiated a MicroATM funding scheme. Details of the scheme are available in reference links.