Less than three months ago, India’s banking sector was hit by a data breach which compromised 32 lakh debit cards and led to fraudulent transactions worth Rs 1.3 crore.
The incident started a debate around security of payment systems. But the debate had just about begun when the government’s demonetisation decision dragged attention away from it. Now as the dust settles and as the government starts to push newer means of digital payments, the focus is back on the security of systems being seen as an alternative to cash.
One such system is Aadhaar-based payments which could potentially allow citizens to pay anytime anywhere with the tap of a finger.
In theory, it sounds simple.
The Aadhaar-based payment system runs on the existing Aadhaar infrastructure through which a person’s biometrics are used to authenticate the user. Once authenticated, the user can transfer funds directly from one bank account to another without going through a mobile wallet or a card.
The payment system requires a smartphone, a working internet connection and a biometric authentication device with the merchant. The customer needn’t have a card or a phone as long as he or she has an Aadhaar-seeded bank account.
National Payments Corporation of India has developed this payments infrastructure over the existing Aadhaar-Enabled Payments System, the railroad on which the public distribution system has been functioning for years now.
Amitabh Kant, chief executive officer of the government policy think tank NITI Aayog said, earlier this month, that all cards and point-of-sale machines will become redundant in the country in the next two-and-a-half years as Aadhaar-based payments become popular.
A Double-Edged Sword
While payments authenticated by biometrics sound like a good idea in a country where less than one in three people actually own a smartphone, there are fears that integrating biometrics with digital payments could prove to be a security headache.
The first part of the problem is that Aadhaar, while effective, is not a fool-proof method of authentication and identification failures are not uncommon. Building a payment system atop the Aadhaar system will simply transfer some of these vulnerabilities.
The possibility of transaction failures due to a biometric mismatch are real, admitted a former high-ranking official from the Unique Identification Authority of India (UIDAI) who spoke to BloombergQuint on the condition of anonymity.
Officially, the false reject rate – rejection of a biometric when it’s actually correct – is set at a maximum of 2 percent for devices that get certified from the UIDAI. On the ground, however, failure rates vary widely, said the official quoted above.
According to the official statistics on UIDAI, more than 16 lakh Aadhaar-authentication requests failed in the past week. The type of errors encountered ranged from the biometric data not matching the database to demographic details not checking out.
The failure rates on Aadhaar Enabled Payment System for interbank transactions (which is a part of all Aadhaar authentication requests) were found to be as high as 60 percent by the Watal Committee on digital payments which published its report in December.
Additionally, newer security threats may also emerge if the scope of Aadhaar is widened. These include identity theft if a person’s biometrics are compromised from the payment system, phishing attempts, and the difficulty in revoking access once biometric information is compromised.
Biometrics aren’t an exact science, the official quoted above said, while adding that possible glitches have to be weighed against the benefits of offering a widely accessible non-cash mode of payment to citizens.
How Easy Is It To Beat The System?
Sunil Abraham, executive director of Bangalore based research organisation Center for Internet and Society (CIS) said that one way to assess how secure a system is to understand the cost and effort that goes into breaching it.
In the case of Aadhaar-based payment systems, the costs may not be high.
“There’s the gummy finger method which essentially requires some Fevicol or gum to duplicate someone’s fingerprint which can be enough to transact on someone’s behalf without them being there,” said Abraham in a phone conversation with BloombergQuint. “An average person can’t clone a smart card. Just fevicol and glue can help you make a gummy finger. The biometric lobby will say that advanced scanners defeat the gummy finger attack but more advanced scanners are also more expensive.”
Also, using more sensitive devices could push up the instance of false rejection of transactions, said Abraham.
There are other concerns. Like the fact that devices used for Aadhaar identification could store personal information, which, in turn, could be susceptible to a breach.
There are five main components in an Aadhaar app transaction – the customer, the vendor, the app, the back-end validation software, and the Aadhaar system itself. There are also two main external concerns – the security of the data at rest on the phone and the security of the data in transit. At all seven points, the customer’s data is vulnerable to attack.Bhairav Acharya, Program Fellow, New America
Acharya, who works at a U.S.-based think tank called New America and focuses on cyber-law, said the key concern is that Aadhaar data can be stolen and misused.
“The app and validation software are insecure, the Aadhaar system itself is insecure, the network infrastructure is insecure, and the laws are inadequate.”
The biometric data collected on the authentication device at a merchant location can potentially be stored on the device as well as the smartphone of a merchant for a long time. Abraham added that there is a possibility that non-certified devices will enter the market, which can store data and use it in the future to do fraudulent transactions.
The concerns over potential misuse of biometric data by private agencies has also been highlighted by the Supreme Court of India. Earlier this month, the apex court refused to expedite the hearing on a petition regarding Aadhaar being utilised for multiple use cases by private companies. It, however, that private agencies collecting biometric data “is not a great idea”.
Deficient Privacy Laws
Apar Gupta, a Delhi-based lawyer working on cyber security, says that the lack of strong privacy protecting provisions is another concern that should be kept in mind while moving towards an Aadhaar-based payment system.
“The data stays for a long time with the stakeholders in the system. The requesting agency can keep it for seven years and the UIDAI can store it for five years. There are insufficient safeguards and there’s an absence of privacy law and an independent privacy regulator,” he said.
India does not have the necessary laws to deal with a decentralised, biometrically-authenticated, mobile payments system, according to Acharya.
“Moreover, current laws and policies regarding the Aadhaar project, particularly the centralised database, are inadequate from the point of view of data security and end-user privacy,” he said.
Abraham of CIS said the issue is wider than Aadhaar. The problem is the lack of a strong data security law.
We only have a minimal data security law under the Section 43A of the Information and Technology Act which only applies to the private sector. There’s no law that applies to the government. Even 43A has not been applied consistently. There’s no place for you to go and complain if your identity has been compromised.Sunil Abraham, Director, Centre For Internet And Society
Gupta noted that, in the event of an identity threat, avenues of recourse are also limited. He said the best option is an appeal in the civil court, which is a long drawn out process.
In final analysis, according to Abraham, credit and debit cards are easier to secure as access can be revoked quickly.
“The trouble with biometrics is that the chain of trust is harder to establish because too many people can get access to biometrics and then you need to devise these convoluted solutions like hardware secure zones,” Abraham said.
“So the advantage of going with a smart card is that it can be easily re-secured, but with biometrics, once I compromise it, it’s lifelong.”
The story has been updated to include the failure rate for AEPS transactions as highlighted in the Watal Committee Report on Digital Payments.