Aadhaar, India’s Biometric Identity System, Partially Survives Constitutional Challenge
In a landmark ruling on the World’s largest biometric identity system, the Indian Supreme Court upheld the Constitutional validity of the Aadhaar Act on the ground that it ‘struck a fair balance between the right to privacy of the individual with right to life of the individual as a beneficiary’, but ring-fenced the law from possible reuse by the State and private entities.
The majority judgement has recognized that while many identity documents exist, Aadhaar is distinct by its uniqueness. Being unique is better than being the best: because if you are the best you are the number one, but when you are unique you are the only one. This validates that even though many ID’s existed, their existence did not undermine the need for Aadhaar.
The judges agree that the state’s interest in the creation of Aadhaar is legitimate. The targeted delivery of welfare, benefits and subsidies from the consolidated fund of India to their intended beneficiaries is an important state aim, and a unique identifier like Aadhaar is a proportionate response to that need. Aadhaar has also helped in fighting fraud by eliminating over two million ghost beneficiaries and has helped millions of Indian to gain access to a bank accounts, life insurance and mobile phones.
While acknowledging the benefits of Aadhaar the judges however have placed strict limits on the world’s most sophisticated digital identity scheme. The Aadhaar identity no longer can be linked to bank accounts and commercial contracts. That puts a dent into India’s digitized identification services used by banks, FinTechs and mobile phone companies in onboarding clients.
On one hand AML and KYC compliance require the checking of identity of businesses and individuals. Aadhaar provides a cost effective tool for eKYC. On the other hand the judges struck down Article 57 of the Aadhaar Act, which allowed the commercial use of Aadhaar for identification purposes. The judges saw a number of commercial applications being an ethical and legal violation even of Article 57, citing a number of abuse cases. It will be difficult to comply with legal requirements when an effective tool for validation will be witheld.
Back to paper: With Aadhaar being removed from commercial applications companies have to resort to paper based methods for identification and authentication purposes. This will be a time consuming and costly exercise. It will inconvenience customers and businesses. Commentators already speculate that this would be a temporary setback as Government would create a new legal framework for the commercial use of Aadhaar. Knowing how slow bureaucracy works in India, businesses required to make identity checks may be in for a long haul.
BIIA Editorial Comment: In the meantime FinTechs will be in peril because their businesses are based on automated verification processes and decision systems. We assume that they are not equipped to handle paper-based authentication. Let’s wait and see how fast intuition comes into play.
Source: Indian Press Commentary