Aadhaar system: Warning on privacy and security risks
Global rating major Moody’s Investors Service has flagged concerns about security and privacy vulnerabilities in centralised identification systems like India’s Aadhaar programme.
The unique ID system often results in “service denials”, and using biometric technologies in humid conditions is unreliable, it noted.
The Aadhaar system enables access to public and private services, with verification via fingerprint or iris scans and alternatives like One-Time Passcodes (OTPs). However, it “faces hurdles, including the burden of establishing authorization and concerns about biometric reliability”, Moody’s said.
“The Unique Identification Authority of India (UIDAI) administers Aadhaar, aiming to integrate marginalized groups and expand welfare benefits access… The system often results in service denials, and the reliability of biometric technologies, especially for manual laborers in hot, humid climates, is questionable,” it stressed.
The rating agency’s remarks assume significance in view of the government’s adoption of Aadhaar for routing direct benefit transfers to beneficiaries of official welfare schemes, and in particular, the diktat to mandate Aadhaar-based payments for labourers under the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) scheme. In August, the government extended its deadline for switching to Aadhaar-based payment system (ABPS) for MGNREGA beneficiaries for the fifth time, pushing it to Dec. 31, 2023.
In a report on “Decentralized Finance and Digital Assets” issued on September 23, Moody’s acknowledged Aadhaar as “the world’s largest digital ID program” that assigns unique numbers to over 1.2 billion Indian residents using biometric and demographic data.
The rating agency termed Aadhaar, and a new crypto-based digital identity token called Worldline, as two digital ID systems in the world that stand out due to their scale and extent of innovation. However, Moody’s also said that they have “drawn scrutiny, especially concerning privacy and security.”
Stressing that ID systems like Aadhaar lead to the concentration of sensitive information with specific entities and increase the risks of data breaches, Moody’s made a pitch for decentralised ID (DID) systems such as digital wallets, based on blockchain capabilities that give users more control of their private data and can reduce online fraud.