Aadhaar – an Indian Megatrend

Report Aadhaar – An Indian Megatrend Leveraging the Potential The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not–for–profit sectors in all regions to identify their highest–value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 75 offices in 42 countries. For more information, please visit bcg.com. Aadhaar – An Indian Megatrend Leveraging the Potential Neeraj Aggarwal Seema Bansal Sushma Vasudevan March 2012 bcg.com © The Boston Consulting Group, Inc. 2012. All rights reserved. For information or permission to reprint, please contact BCG at: E–mail: bcg–[email protected] Fax: +1 617 850 3901, attention BCG / Permissions Mail: BCG / Permissions The Boston Consulting Group, Inc. One Beacon Street Boston, MA 02108 USA Contents Executive Summary 4 Introduction to Aadhaar 6 Need for Aadhaar 6 Characteristics of Aadhaar and the Enrolment Process 7 Roll–out and Ramp–up Plan 8 Convergence with Other Key Indian Megatrends 9 Lever to Transformational Opportunities 10 Increasing Effectiveness of Social Welfare Delivery 12 Existing Issues in Social Welfare Delivery 12 Interventions to Control Social Leakages 13 Potential Benefits in the Delivery of Social Welfare Schemes 14 Ecosystem Required to Leverage Aadhaar 15 Revolutionizing the Development Infrastructure 17 Education and Skills Platform 17 Health–care Applications 20 Residential Energy Monitoring Enabler 24 Aadhaar as Part of Social Development Infrastructure Fabric 26 Enhancing Factor Productivity and Reducing Transaction Costs 27 Improving Efficiency in Supply Chain Management 27 Spurring Rapid Growth in Electronic and Mobile Payments 29 Heralding the Change 32 Comprehensive Impact on Consumers 32 Potential for Cross Sector Collaboration and New Business Opportunities 33 The Way Forward 34 Note to the Reader 36 For Further Reading 38 Aadhaar – An Indian Megatrend — Leveraging the Potential 3 Executive Summary n important and unmet need exists in delivery of social welfare programs is more effective. India for a nationally accepted and verified Besides the tremendous economic benefits, intangible identity number that both service providers benefits such as facilitating faster integration of and consumers can use with ease and beneficiaries will also emerge. Putting this in place will confidence. This need is accentuated in the require a well–planned and coordinated effort that will Acase of the poor, where the lack of identity is denying include revamping and customising existing systems and them the ability to avail of basic products and services. It processes used for schemes. However, the recurring is this need that Aadhaar caters to, by providing a unique benefits involved in such a venture will far outweigh the identity number that meets three criteria — ensures one–time cost. universality, avoids duplication and provides biometric authentication. Aadhaar has the potential to enable several mainstream applications that are essential for the social and economic Aadhaar’s importance lies in the fact that it is concurrent development of the country. Several common challenges with many other trends, such as ubiquitous connectivity that these sectors face are infrastructure shortages and and content availability, urbanization, rising income, and stretched resources. Aadhaar can help alleviate some of consumerism, among others. This convergence sets the these challenges by providing a platform for information platform for business innovation and opens up many capturing and identification. opportunities. The report focuses on a few key opportunities — such as setting up basic infrastructure, developing ◊ In the health–care sector, Aadhaar can facilitate initial applications for social welfare delivery, enabling creation of digitized medical records. This can, in turn, mainstream applications for fostering national facilitate electronic/mobile health applications that development, and facilitating next generation applications can cater to the needs of different segments of the for improving productivity and reducing costs. population: improve accessibility and affordability of health care for the ‘un–served’, provide convenience However, as Aadhaar rolls out further and Aadhaar– and affordability for the ‘under–served’ and provide based applications evolve, many other opportunities will value–added services that will increase compliance emerge. and convenience for the ‘quasi–served’. Aadhaar can help reduce leakages in social welfare ◊ In the education and skilling sector, Aadhaar–based schemes by ensuring accurate identification of records on educational and vocational courses that an beneficiaries and controlling false reporting and individual takes has the potential to impact the entire payments. Aadhaar–based interventions could improve value chain: smoothening the enrolment process by effectiveness in the delivery of social welfare schemes by digitizing certificates and reducing frauds due to shifting to direct benefits and verifying if the intended duplication, enhancing service provision by monitoring beneficiaries actually receive subsidies. It can help in the attendance of students and teachers, and increasing bringing down transaction costs for poor and can ensure post–education employment opportunities by creating 4 The Boston Consulting Group a soft–employment exchange with nationwide reach. depending on the category of use, data sharing norms Specifically in vocational training, an Aadhaar–based will need to be defined: skills database can fill an existing void by providing a qualification basis to recruit, up–skill, and train ◊ Areas such as social welfare delivery where the resources. application becomes the norm and the benefits are realized post individual authentication ◊ In the energy sector, Aadhaar can be used to create and foster ‘energy consciousness’ in individuals. By ◊ Areas where the enrolment is registry based and is tracking energy consumption across time at the maintained with high levels of privacy and will need individual / household level, systems and processes individual authentication to release each time over can be developed to incentivize ‘energy conscious’ and above the registry behaviour. Another benefit is controlling leakage of subsidies in this sector, by enabling direct subsidies ◊ Areas where the usage is completely voluntary, where and right identification of beneficiaries. people make the trade–offs at each occasion of use based on benefits that can be realized. Further, Aadhaar can also facilitate development of some next generation applications to enhance productivity of As India stands poised to be an economic force, it is operations and reduce transaction costs for organizations. important to understand and leverage the full potential of Aadhaar, in these cases, could aid in the ease and speed Aadhaar. It can be a very critical part of building the with which these applications are put in place. These enabling digital infrastructure and it can be the harbinger include, but are not limited to, improving supply chain of new things. The applications, that it spurs, have the infrastructure and enabling e–commerce and m–commerce potential to influence every facet in a consumer’s life. payments. They can also foster significant entrepreneurial and cross– sector collaboration opportunities. However, all this would ◊ Aadhaar can fundamentally improve the supply chain be possible only if all stakeholders and enablers, including infrastructure, especially for small– and medium–sized the government, corporates, institutions and consumers, firms with fragmented sourcing and distribution among others, incorporate Aadhaar into their strategic chains, by identification and tracking of its supplier agenda and start acting on it. and distributor network. Aadhaar can, in a way, be equated to the emergence of ◊ On electronic and mobile payments, Aadhaar can the Internet. As we stand at the point of its evolution, it influence rural distribution infrastructure by providing is very difficult to predict how wide and diverse its usage alternate business models as well as enhance the e/m– will be. However, what we can be sure of is that it will commerce experience and provide an impetus to the change the social and business infrastructure of this already growing urban e/m–commerce story. nation — affecting government–to–resident, business– to–business, and business–to–consumer interactions in a Handling individual privacy needs appropriately is revolutionary manner. paramount across these different applications. Hence, Aadhaar – An Indian Megatrend — Leveraging the Potential 5 Introduction to Aadhaar “There is nothing more powerful than an idea whose for a mobile and nationally recognized identity becomes time has come” even more imperative. — Victor Hugo Be it opening a bank account, getting a mobile connection Need for Aadhaar or applying for a government food subsidy program, millions of Indians are unable to avail of services from the government and financial services sectors because India has never had a unique and universal identity they lack proper

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