Lessons from banking sector transformation in India

Written by Carol Realini Thursday, 26 July 2012 19:28
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In this extract from BankRUPT the book that's rocking America's banking sector, Carol Realini looks at banking sector transformation in India.


In the US, I can identify myself to the bank in several acceptable ways, including with a driver’s license or social security number, and then the bank can confirm that I am who I say I am. To do this the bank uses multiple databases. Some people are flagged as suspicious, and so the bank may be required to do some additional checks. I often fail the checks because a while ago I had a typo on my name on my driver’s license, which I didn’t bother to change. So sometimes the flags are innocent enough, but each needs to be investigated. Other times, the person is a known criminal and they will be identified and denied. In the US, this complex system works well.


In India, it is a whole different world. Millions of people don’t have any form of third-party identification. Others have IDs but it is difficult and expensive to verify who they are.


One of my favorite stories from working in India has to do with signing up customers for mobile bank accounts. We were working hard to drive down the cost of the signup so we could prepare for a national launch. I saw the monthly cost report and I was upset. After streamlining our processes with our partner, Yes Bank, the monthly cost number had gone up. Upset, I called for a meeting immediately. I am not a big meeting person, but I wanted to understand why we were working hard but moving backward.


The answer was revealing about the identity challenge in India. It was monsoon season and the paper driver’s licenses were likely to be wet. So when we copied them or took a picture of them via cell phone, they were more likely to be rejected by the bank as illegible. Solely because of this, the cost went from $12 a customer signup to $17 a customer. That is when I realized something big had to change. We eventually reached $10 a customer but we really needed the cost to be under one dollar for scale.


The Indian leadership understands the identity challenge and how it is an inhibitor to financial inclusion and has other implications on inclusive growth. So in 2009 they launched the Unique Identification (UID) project. The idea is very simple: Every citizen of India will have a twelve-digit identifying number (called Aadhaar).[i] The Aadhaar numbers are randomly generated and contain no information about race, creed, or gender. The number is stored in a centralized database and linked to the basic demographics and biometric information – photograph, ten fingerprints and iris – of each individual. It is easily verifiable in an online, cost-effective way. Two hundred million people have already received their Aadhaar, and the goal is to have a total of six hundred million people in the database by 2014.[ii]

[i] The Hindu (2009) Rs.100 crore for Unique Identification Project [Online]. Available from: [Accessed, 1 March 2012]

[ii]Reform by Numbers, The Economist, January 14, 2012,  DELHI AND UTTAN GAON, from print version,, [Accessed February 23, 2012]

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