For corporate India, electronic authentication and e-signatures were supposed to ease customer onboarding and verification. However, frequent changes in regulations by the Unique Identification Authority of India (UIDAI) have meant that companies are finding it difficult to depend on Aadhaar
as of now.
Aadhaar-based e-signatures were once considered the gold standard of reliability to onboard and verify customers in a paperless manner. With the launch of Aadhaar
e-sign, companies saw their costs go down significantly and the chance of fraud reduced as each signature is digitally authenticated against the UIDAI database.
However, use of e-sign has witnessed a severe decline in volumes, according to two companies that provide the e-sign services to dozens of clients in the financial services sectors. One of these companies, eMudhra, a large Aadhaar
e-sign provider, once had a market share of over 50 per cent. However, the firm has seen a sharp decline in its e-sign-based revenues.
A senior executive in eMudhra said its revenue from Aadhaar
based e-sign was 13 per cent last year but is likely to be almost zero this year.
So what has changed in the last one year? Regulations, say industry players. eMudhra, for instance, had done 45 million Aadhaar
e-signs till the beginning of this year but in the last five months the volume has come down severely.
“The uncertainty around the regulations and the pending Supreme Court case have meant that the demand and supply for Aadhaar
e-signs are severely impacted,” the executive said. All that V Srinivasan, founder-chairman, eMudhra, is willing to concede is: “eSign is a small business for eMudhra.”
The regulatory uncertainty stems from frequent changes in rules regarding the use of Virtual ID by companies. A customer can generate one Virtual ID a day but the UIDAI regulations regarding the mandatory use of Virtual ID have been constantly shifting.
On January 11, the UIDAI announced through a circular that companies should gear towards accepting Virtual ID, instead of Aadhaar
numbers. The circular stated that by June 1, all Authentication User Agencies (AUAs) should migrate to Virtual ID.
On May 16, the authority classified agencies using Aadhaar
into global and local AUAs. It now stated that local AUAs “must use” Virtual ID for performing OTP-based authentication while they could still use Aadhaar
number for biometric authentication even though they can’t store the numbers. The deadline for mandatory compliance to this circular was moved by a month to July 1, 2018.
Soon, the UIDAI issued another circular, dated June 29, which stated that even global AUAs should develop their applications in such a manner that their Aadhaar-based services can continue even if their classification changes. The UIDAI has not responded to a questionnaire sent by Business Standard on this issue.
For companies doing multi-party transactions where e-signatures from a customer are required at different process points, the Virtual ID becomes invalid since it cannot be traced back to an Aadhaar
number. This is the problem faced by SignDesk which also provides Aadhaar
“The process is very complicated for a layman. A user has to go to a third-party, generate it and then come to our onboarding process,” said Krupesh Bhat, CEO of SignDesk.
Bhat said the e-sign volumes on his platform have dropped by about 25-30 per cent. The issue is unlikely to be resolved till there are clear guidelines from the UIDAI and the Supreme Court decides on the constitutional validity of Aadhaar, he added.
According to industry players, many companies migrated from Aadhaar
acceptance infrastructure and replaced it with Virtual ID. But now that Virtual ID date has been extended, these players will have to go back to Aadhaar
but at the same time still be prepared to accept Virtual IDs.
How the regulatory flip-flop unfolded
Virtual ID is a 16-digit mask number provided by a user to a company for authentication by the UIDAI but does not reveal the actual Aadhaar
January: The UIDAI introduced virtual ID and gives time till June for all companies to start accepting it
The UIDAI bifurcates Aadhaar
authentication agencies into local and global AUAs. Global AUAs can use Aadhaar
while local AUAs have to mandatorily use Virtual ID. The deadline extended to July 1
The UIDAI asks all agencies to be prepared to use both Aadhaar
and Virtual ID and asks global AUAs to start accepting virtual ID too
July: The deadline for Virtual ID gets extended to August 31, while for e-sign companies no deadline is specified