Nudging a Nation

The idea of how humans behave has always fascinated me. I recently read a very fascinating book on the subject called Nudge which talks about how incentives, nudges, biases, social proof impact human choices and actions. India, with nearly 1.3 billion people, 600000 villages, 3000 castes, 25000 subcastes and rising income inequality is more heterogeneous than most other nations and definitely a better candidate to be evaluated using the principles of Nudge.

One of the most important developments in 2017 was the enforcement of Aadhar in India (equivalent to the Social Security Number in the US) to avail public and private services. From filing your income tax returns to getting your passport to registering your company to buying life insurance, everything requires your Aadhar. Your Aadhar card is required to be linked to your bank account, equity investments, Mobile Number and much more. With over 99% of Indian adults covered under Aadhar, this is definitely the most far reaching socio-economic reform in recent Indian history.

Besides being used to verify identity, Aadhar usage is presently limited to direct benefit transfer for receiving government subsidy and for biometric attendance in government offices. Having said that, the future use cases seems very promising as below

• Aadhar enabled Payments for merchant transactions (from utility bills to paying for grocery)
• Aadhar Verified Social profiles
• Aadhar verified Matrimonial profiles
• Aadhar-Enabled Registration of Vehicles
• Aadhar Enabled Purchase of Mutual Funds
• Aadhar Enabled Consumer Complaints
• Aadhar Enabled Home Services (from Cooks to Maids to Drivers to Beauticians)
• Aadhar Enabled Property Sale/Purchase

The list is endless. The underlying principle for all use cases is the same - Create a system of record for persons transacting with government and registered private entities. At the heart of it, Aadhar is capable of enabling what we commonly call as a Trust Economy. No wonder, Aadhar is one of the most hotly debated topics in Indian media.

The concerns raised with respect to usage of Aadhar fall primarily in four categories -

1.      Data Security & Privacy: The most cited concern is violation of data privacy as organizations can access your Aadhar information without your consent and utilize it for their benefit. There are concerns around leakage of Aadhar Numbers where the government is attempting a workaround using Virtual id generation

2.      Nature of Use: The treatment of Aadhar for public and private services at present is ambiguous – Be it the questionable usage of Aadhar as proof of address or citizenship by government agencies, banks and other private entities

3.      User Adoption at Scale: While 111 crore people are under Aadhar, only 42 cr. (or about 40%) are on mobile internet. Presumably, even a smaller fraction will be able to avail Aadhar enabled digital only services given the extent of digital literacy (Eg. Aadhar OTP for e-verification of tax return, virtual id for security). 

4.      Resilience of Technology: Finally, there are technical issues in the usage of Aadhar – from delay in receipt of Aadhar OTP to non-acceptance of your fingerprint by biometric readers. Further, the adoption of Aadhar OTP or Biometrics is still evolving.

In this article, I will attempt to apply the principles of Nudge to establish a set of choices for the government pertaining to Aadhar that could potentially make everyone better off

A nudge, as we will use the term, is any aspect of the choice architecture that alters people’s behavior in a predictable way without forbidding any options or significantly changing their economic incentives - Richard Thaler, Nudge: Improving Decisions About Health, Wealth, and Happiness

1.     Drive Security based on mutual exchange of data

Let’s examine the issue of security – Today, private companies from telecom operators to banks to insurance companies to mutual funds want you to link your Aadhar number to their account. At one level, it will be hitherto impossible to stop the growing demand of services that you need to link your Aadhar with. Instead of trying to avoid sharing Aadhar details, a more plausible approach would be to make Aadhar enabled transactions multi-lateral where Aadhar information of all parties involved get attached to the transaction (Choice#1). This is a case of building trust and eliminating bias in all transactions.

Imagine a simple transaction involving two persons. If both people share their Aadhar information for the transaction, it will make the transaction trustworthy. Imagine your house maid marking her attendance using a biometric reader that you can eventually use to track the number of days she took leave and automatically compute the salary to be paid at end of month!!

So how do we enable this choice?

• Create a Single Source of Truth: One should be able to capture and record all pertinent information for every “Aadhar enabled transaction”. This includes biometric data, payments, call records etc. with timestamps of all parties involved. For example, you want to engage a maid at your home. To verify the identity of your maid, you can simply ask the maid to submit his or her biometric record. Now, this data will be stored only in the UIDAI database. This avoids the need to maintain copies of the same data with multiple entities!
• Allow users to opt in for Aadhar services centrally rather than individually: Now, instead of each bank or telco asking you to link your account individually with Aadhar, the private companies must be asked to register with the Aadhar authority, UIDAI to offer Aadhar-enabled services. UIDAI can then grant a central opt-in facility for users whereby the accounts for which Aadhar needs to be linked appear on the Aadhar profile page of every user. The user can select which services he or she would like to link to Aadhar. Government can determine which services should be mandatory for Aadhar linkage (eg. Education, healthcare, Legal, Tax). Non-Government Services should be made optional. The users can choose to revoke access for optional services as required. Further, One-time access to Aadhar with limited validity may be provided using Aadhar OTP. This will nullify the risk of Aadhar information falling into wrong hands
• Permit Authorized Access with two-way data exchange: An individual can grant access to a third party entity (individual or government or company employee) to access relevant information linked to the Aadhar. Not only that, each time an entity accesses the Aadhar record of an individual, the individual is notified about it. Further, the Aadhar details of those seeking access to your Aadhar records should be published to the central database. Only data fields pertaining to tracing the individual may be mandatorily available (Eg. Email, mobile number, alternate contact number, address). All other fields should be made optional for individuals to grant access.

2.     Use Aadhar beyond identity

In India, till date, we have always had two sets of documents for identity proof and address proof. (Eg. PAN for identity and Passport or Voter id for address proof). Further, there is a lot of inconsistency in documents sought as address proof. For example, for voter id creation, gas bill is accepted as address proof although it is not listed as a valid address proof by the telco. Banks follow different policies – While Bank A accepts your address proof based on self-declaration, Bank B expect you to provide atleast 2 documents as evidence. Although India has only 23 mn fixed line subscribers as compared to 1.2 bn mobile subscribers, mobile bills are still not accepted as valid address proof.

To avail most government services (eg. passport, vehicle registration, driving license), address is a mandatory requirement. Now, 450 mn people in India are internal migrants with nearly 45 mn people who have migrated for work/employment and nearly 225 mn who have migrated due to marriage in the last decade. Most of them would not have their current address as permanent address. Government should legitimize use of Aadhar as address proof (Choice#2). This is a case of simplifying the default choice for everyone. As a minimum, Government must provide flexibility to people to report alternative address as below –

• Current Address (Not Owned Property) (Self-Declaration without any proof)
• Parents/Husbands Address (backed by their Aadhar details)
• Permanent Address (Owned Property) (backed by a property agreement ideally linked to Aadhar)

This will allow users to select the address where they seek any Aadhar enabled service to be delivered by the government or private entity (This is very similar to any e-commerce platform where you can add your work or home address)

3.     Drive adoption at scale using Offline Centres and Credibility Scores

While 111 crore people are under Aadhar, only 42 cr. (or about 40%) are on mobile internet. Presumably, even a smaller fraction will be able to avail Aadhar enabled digital only services given the extent of digital literacy. To solve for this, Government should lead the way with creation of Aadhar enablement centres that do the following as a minimum –

• Educate people about services that are deliverable using Aadhar
• Facilitate Delivery of Aadhar enabled Services (Eg. Support for end-to-end Aadhar enabled services including generating OTP)
• Facilitate Aadhar Profile updates (Eg. Access Aadhar profile, Provide updated Aadhar card)

Pretty sure, we can add more to the above list. The idea behind Aadhar enablement centres is that it will create an authority that citizens can trust and approach for Aadhar services.

Another interesting idea is to develop a credibility score for those who opt into for Aadhar enabled or supported transactions (Choice#3). This is a case of offering incentives for sharing information.

In simple terms, one can rank users on a scale of 1-100 where 1 = Low and 100 = High based on Aadhar use. For example, person X deals with Seller Y whose credibility score is 80. In simple terms, this could imply that Y has opted in to share his or her Aadhar information in 80% of the transactions routed through him or her. One can think of more complex ways to model the credibility score. This can act as a powerful social proof as people would be more interested in the credibility score of an individual rather than his or her Aadhar number itself!

4.     Make Aadhar Technology resilient – Can Blockchain be the solution?

Finally, the relatively easier part to solve for is technology. This includes timely delivery of Aadhar OTP or accurate reading of the biometric data. While it is early to comment, I believe one must explore using Blockchain technology to build Aadhar enabled service platforms (Choice#4). The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value (more so information in this context). Here, The UIDAI database can lend itself to being distributed in nature to record transactions between individuals, empanelled companies, government and their employees. This will create a single point of truth for all transactions executed on the platform with complete transparency at every step of the transaction. For example, if one fails to receive the insurance policy on time, one can find out by looking at the Insurance Aadhar ledger as to reasons for failure. At the moment, it’s hard to determine if the issue lies with insurer or Insurance Regulatory authority or aggregator. The core benefit of implementing such a technology is the ability to nudge users (both human and machine) to take action. Take the case of an online police complaint. Here, the technology will constantly nudge the assigned police officer to take action on the case as his or her Aadhar number is linked to the case. Today, over 4.5L cases are pending in consumer courts of which 1.75L cases are tagged under “Other Category” which is practically a black box. Imagine if the technology can help bring a closure to these cases by creating a digital trail of all transactions on the case. This will truly be a gamechanger for a country like India.

In summary, the government needs to make several choices pertaining to Aadhar in interest of its citizens. This will go a long way to eliminate human bias or fraud and build trust among citizens both in government and private organizations. 

About the Author

Arvind Shastry is a senior professional with 9+ years of corporate experience across energy, IT/telecom, Media and FMCG. He has worked in multiple roles across strategy, sales, marketing, product, finance and talent management. He is graduate from Indian Institute of Technology Bombay (Batch of 2006) and Indian Institute of Management Calcutta (Batch of 2011). He loves to analyze complex problems and uncover insights. He is an avid reader and loves writing. Follow him on Twitter and Medium