With recent demonetization of Rs 500 and Rs 100 rupees notes, the government has kick-started a new wave of digital revolution. There have been lots of talks about government’s Aadhaar based payment solution. The new payment system which aims to offer basic types of banking transactions without the hassle of credit and debit cards, PINs and passwords.
Introducing Aadhaar Enabled Payment System (AEPS) as the name suggest is an Aadhaar based system which allows you to do basic banking transactions like fund transfer, cash deposit, cash withdrawal and balance enquiry. It’s developed by National Payments Corporation of India (NCPI) and Unique Identification Authority of India (UIDAI) along with Reserve Bank of India (RBI).
For this payment system to work, you just need to link your Aadhaar card with any of your bank accounts. Once linked, you can securely do transactions with Aadhaar Pay enabled merchants via Aadhaar biometric authentication. Banks or the government will not be levying any transaction charges for both customers and merchants. The money will be transferred directly from customer bank account to merchants bank account, just like in a Unified Payment Interface (UPI) transaction.
AEPS, Aadhaar Payment App & Aadhaar Pay
The Aadhaar Payment App or Aadhaar Pay is for merchants to accept digital payment from customers. It uses AEPS for all transaction and its lots more secure than other third party apps and PoS machines. For AEPS to work both merchants and customers need to link their Aadhaar with their bank accounts.
Merchants can register for the AEPS from government agencies or banks. Currently, State Bank of India and IDFC Bank are providing AEPS based Aadhaar Pay merchant solution. We have earlier written an article explaining in details about IDFC Aadhaar Pay payment solution for merchants.
Once merchant gets approval from a bank to use Aadhaar Pay, they can download the Aadhaar Payment App on their smartphone. They also need to buy a biometric scanner (finger print or retina scanner) which usually cost less than Rs 2500. The biometric reader will be then linked to Merchant’s smartphone using a USB data cable. Merchants need to enter their Aadhaar card number, linked bank’s name and validate it via biometric scanner. Once the whole process complete, merchants can go cashless and start accepting digital payment from customers.
To accept payments from customers, merchants need to enter customer’s Aadhaar card number and bank name linked with Aadhaar, followed by the amount. Customers can then authenticate the transaction via scanning their fingerprint or retina on the biometric reader. After authentication, amount will be instantly transferred from customers bank account to merchants bank account. All fund transfers are completed instantly as AEPS uses Immediate Payment Service (IMPS) service. In addition, the whole service works 24 hours a day, seven days a week.
AEPS main services
- Instant Aadhaar to Aadhaar based fund transfer using Aadhaar Payment App and Aadhaar Pay.
- Cash deposit and cash withdrawal through Banks business correspondent.
- Balance enquiry and other digital bank transactions.
- Merchants requirements – Aadhaar Payment App or Aadhaar Pay from a bank, biometric reader and link his/her Aadhaar with a bank.
- Customer requirements – Aadhaar number, bank account and fingerprint authentication on the biometric reader.