The Unique Identification Authority of India (UIDAI) is taking steps to bolster the offline Aadhaar-based identity verification process, aiming to make it more secure, user-friendly, and widely adopted across financial and fintech services, as per two senior bankers.
What is the key objective?
The key objectives of UIDAI’s latest move are to allow Aadhaar-based KYC to be completed without requiring citizens to share their Aadhaar number or personal details, thereby enhancing privacy and security, ET reported.It also aims to simplify the offline identity verification process by promoting the use of QR codes and PDF formats, making it easier for users to manage and share their identification documents. Additionally, the initiative is focused on encouraging startups and financial service providers to adopt compliant and regulated verification methods by integrating with authorised agencies.
Why the Change?
The move comes amid concerns about unauthorised access to Aadhaar data. In June, the UIDAI and the Ministry of Electronics and Information Technology (MeitY) blocked several startup websites for allegedly accessing Aadhaar information illegally. These disruptions hit multiple sectors, including fintech, food delivery, and e-commerce, where Aadhaar was widely used for verifying gig workers and blue-collar employees.Many fintech and non-banking lenders faced onboarding delays as they relied heavily on Aadhaar for customer verification.“There have been multiple rounds of conversations, and UIDAI has made it very clear that consumers will be able to use offline Aadhaar-based KYC without any need to share their Aadhaar number or personal details,” one of the bankers told ET.The UIDAI is working to regulate and streamline the process through authorized entities like Aadhaar Authentication Agencies and KYC User Agencies.
What’s New?
- UIDAI will promote QR codes and PDFs for offline KYC instead of the current XML-based method, making it easier for users to share and manage documents.
- Offline Aadhaar-based KYC will now not require biometric authentication or OTP, easing access for users in remote areas.
- The process must be done with customer consent only.
The UIDAI provides three KYC options:
- Electronic KYC (OTP-based): Requires sharing Aadhaar number, and is mostly used by banks and insurers.
- Biometric KYC: Requires in-person verification.
- Offline KYC (XML method): Users download a data file from UIDAI to share with service providers.
“The problem was with the offline method, where many startups were providing this verification service through unauthorised means. UIDAI is coming down hard on players who are offering non-compliant offline KYC flows,” the founder of an identity verification startup said.With UIDAI clarifying norms and simplifying offline verification, more banks and fintechs are expected to adopt it. Identity verification startups are now looking to integrate compliantly by partnering with authorized agencies, ensuring continued service while adhering to regulations.As the government tightens controls and improves usability, offline Aadhaar KYC is likely to play a bigger role in digital identity verification across India’s expanding financial ecosystem.
