Aadhar Verdict – As SC Scraps Section 57, Will Alternative Lending Platforms Suffer from No eKYC?

Looks like the Supreme Court of India is on fire as soon after scrapping of the controversial section 377, the apex court has now rolled its sleeves to address concerns related to the much talked about Aadhar card.

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In a detailed judgement, the SC said Aadhaar scheme is constitutionally valid while it struck down Section 57 of the Aadhaar Act which would now prevent private companies such as banks and telecom companies from accessing the data.

What is worth noting here is the fact that alternative lending startups who were leading India's financial inclusion plans and striving on Aadhaar data to verify individual lenders, will now more have access to this database.

What Aadhaar Made Easy?

One of the key reasons why alternative lending platforms considered Aadhar over other identify proofs is because the scheme narrowed the turnaround time for these fintech startups which in turn helped the service their customer better.

Rachit Chawla, CEO& Founder, Finway says Aadhaar had all details like biometric, eye scan and everything so that information was very useful and the whole process was quick and short.

"Just by taking their thumb impression we could access all their information. Now that it is no longer there and we are back to slow processes. Therefore the speed of working is also affected," he shared with Entrepreneur India.

Additionally, data accessibility with Aadhaar was robust – thanks to server and infrastructure built around it. To top it all, fintech startups had enjoyed the privilege of eKYC mandates, which allows borrowers to sign all documents digitally using thumb impression. This process is now stalled.

Talking about how this would be a disadvantage for upcoming fintech sector and alternative lending industry specifically Chawla says, "We will have to go back to again following the old traditional processes which are time-consuming but we are not left with any other option. Also, the scalability will be impacted because now the compliances will be more time-consuming."

Is the Move Directed-right?

Just like every other person and industry, fintech companies are happy of that the apex court has cleared the air and accepted the Aadhaar's constitutional validity.

Bhavin Patel, Co-Founder, and CEO, LenDEnClub says there have been many questions regarding the data security, the surveillance state, privacy problem etc. and with today's verdict, the air is now clear around those concerns.

"However, the Supreme Court highlighted some of the flaws in Aadhaar law due to which private companies have been barred from using Aadhaar for identity verification. This may affect the fintech as well as other financial companies which uses the only Aadhaar as their identity verification mechanism," he added.

Furthermore, to address privacy concerns privacy concerns around Aadhaar number, UIDAI had introduced Aadhaar Virtual ID and UID Token earlier this year. The virtual ID allowed Aadhaar holder with an option of not sharing his Aadhaar number, while on the other, UID token system avoids creation of parallel databases of people by companies and government departments.

Amit More, Founder and CEO of Finzy is looking forward to seeing the bearing of today's SC verdict on these additional security layers of Aadhaar Virtual ID and UID Token.

"Overall, the verdict has been positive, taking away a lot of uncertainty around the validity of Aadhaar itself. Fine print the verdict and how the ecosystem adapts itself to the new rules would be key to the ongoing evolution of Indian digital economy," More noted