Aadhaar – Meaning And Its Prime Features

What Is Aadhaar?

The term Aadhaar is derived from the language Hindi, with the literal meaning of the word being ‘Foundation’.

Aadhaar is a cloud database identification system that holds the information such as name, fingerprint scan, iris scan, address, age, gender and Aadhaar number (12-digit number) of over a billion Indians.

It was introduced in 2009 by the Government appointed at the time so that Welfare payments could be made by the State to those individuals that are entitled to receive the same.

Aadhaar is an open-access software and can be used by third parties (such as companies, banks and individuals) for no charge what so ever.

In this day and age, fingerprint readers are used by banks, insurance offices, Government Offices, etc. and is considered the most secure mode of verification of identity.

This is because no two fingerprints are the same for any person in the world and the prints stored online cannot be tampered with. 

Also, it is important to note the development and contribution of IndiaStack, which is a series of complex digital infrastructures that allow people to store and share their data.

Data can be birth records, medical records, tax filings, medical statement, credit statement, etc.

Any payments to be made can be connected through a Unified Payment Interface (UPI) such as Bharath Interface for Money (BHIM) and proposed Aadhaar Pay in the coming months.

Aadhaar and its features

Features Of Aadhaar

Some of the main features of Aadhaar that are beneficial to companies are:


In business, it is of a critical essence to understand that verification of ID and reputation are tangent to each other.

Aadhaar-accessed services can identify and verify a person’s real legal identity like no other service can.

Businesses already employ their own verification mechanisms through third-party services and websites such as Facebook, Gmail or just a phone number, etc.

Though these mechanisms are being currently used, it does not securely authenticate the identity of the individuals claiming to be themselves.

The use of Aadhaar also increases trust when one party presents his Aadhaar information to a person or body that require ID verification.

Convenience and Incentives

Considering one billion people have Aadhaar cards out of a population of just over a billion, Aadhaar can be used as a single uniform identity verification process for any company or organization.

The Government is pushing for every citizen to have an Aadhaar card which means that all citizens personal information will be accessible for companies that incorporate the verification procedure which will be convenient for the citizen and the company or party that requires verification of identity.

The Government has also allocated various incentives to merchants that use an Aadhaar payment system.

Aadhaar-based payment systems are currently used by 1,10,000 businesses in India to receive payments or disbursing cash.

Credit Facility

It would be way easier for an individual to avail credit facilities online by presenting their Aadhaar information for proof of the same.

Currently, the norm in India is to borrow against assets which shouldn’t necessarily be the case.

Not all people have assets with a value enough to declare against which a loan will be issued.

With Aadhaar, people will be able to borrow against their cash-flows which will be proven by past tax returns.

The Aadhaar card has already been proposed as an essential document in the availing of food grain subsidies, although not mandatory.

States have also been asked to link ration cards of individuals with their Aadhar numbers at the earliest.

Tax And Compliance

The Government proposes to make Aadhaar mandatory for the filing of Income Tax returns by linking all bank accounts to the Unique Identity Number.

Wouldn’t that be a breeze for filing, assessing, collecting and disbursing all things related to tax?

Well, even companies could integrate into this system and pay employee taxes collected at source and company tax payable through an Aadhaar-enabled system.


Most if not all banks have integrated with the Unified Payment Interface which enables customers to receive and send money through their banking apps as well as authorized third-party apps.

The Unique Identification Authority of India) has proposed to make it compulsory for all biometric devices using Aadhaar encryption to embed the Aadhaar encryption key at the time of manufacture.

This will add another security layer to the hardware.

Uniform ID Possessed By Everyone

A company or business typically spends over INR 1500 on obtaining, evaluating and validating an individual’s data related to personal identification.

Whether it be OLA validating the identity for onboarding a new driver to verification done by a bank or insurance company for a new customer.

Since everyone possesses a uniform identification card, it will be easier and cheaper to validate an individual’s real identity for the purpose of employment or whatever the reason may be.

Removes Bureaucracy

In any process, the more people that are involved, the slower the process becomes and in most cases, someone has to grease someone or the other’s palms.

Aadhaar is completely digital and thus, in the process of verification or authentication, it is very difficult to solicit a bribe or delay the procedure because of bureaucratic red-tapism.

Statistically speaking, it tends to speed up any process that it is introduced to by several folds.

The Jio Instance

Reliance Jio has incorporated the use of Aadhaar in their identity verification process to the existing Know Your Customer (KYC) procedure.

The purpose of both is the same, to verify the identity of an individual who will be authorized to use a Jio sim card.

What’s the critical difference? While the KYC procedure takes days, sometimes even weeks to process and validate, the alternative method requires your fingerprint to be scanned on a scanner and upon immediate authentication of details, Jio downloads the same data and issues a Jio card to the subscriber.

The best part, it gets activated immediately. Talk about how digitization takes a week-long (on average) process and shortens it up to a few minutes.

With that efficiency applied to other sectors, who knows what to expect in terms of development.

The use of Aadhaar would enable the use of digitally driven credit which would result in people shifting to operate in the formal economy as opposed to the current statistic – 90% of the Indian economy operates in the informal sectors of the economy.

Aadhaar systems are also in line with India’s ambition of becoming a cashless currency economy.

To understand how Aadhaar is beneficial to our fast-growing economy, check out our article on benefits of having an Aadhaar card.

For the scanty few of you out there that haven’t got your Aadhaar card yet (surprisingly), get it done as soon as possible.

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