How Does Aadhar Enabled Payment System Work?

Aadhar Enabled Payment System:

Aadhar Enabled Payment System(AEPS) is a way to make financial transactions from the bank account with the help of your biometric authentication. This system neither requires your signature nor Debit/credit card. Visiting a bank for getting money is not required through the AEPS. Rather, it uses Aadhar Card data for the authentication. It's another initiative by the NPCI (National Payments Corporation of India) like UPI and USSD.

Benefits of Aadhar Enabled Payment System:

• Performing financial & non-financial transaction with any branch is possible in India with AEPS.
• The signature or debit/credit card not required.
• It is fast and secure payment method. As biometrics required so chances of fraud are minimized because on one can emboss your fingerprints easily.
• Banking has been easier at the distant rural place with the micro POS.

The AEPS gives you banking facility on the go. However, It gives you only basic services. These 4 services can be done through the AEPS.

• Balance Check
• Cash Deposit
• Cash Withdrawal
• Aadhar to Aadhar Fund Transfer

Requirements for AEPS:

Through the Aadhar Enabled Payment System, you can get money without producing any paper or card. However, your Aadhar card number should be registered with your banking account. If you have not linked your Aadhar with a bank account then you won't able to get benefit from AEPS. 

For Aadhar Enabled Payment System or AEPS transaction, you'll need the following information.

• Aadhar Number (12 digits)
• Bank IIN (Issuer Identification Number) or Name
• Fingerprint

It means you'll need to remember your Aadhar number only, for the bank transaction. It is just like remembering own cell number.

Why Aadhar for Authentication:

Do you remember, at the time of Aadhar enrolment, government authorities have taken your fingerprints and iris scan? These biometric data gets linked to the given Aadhar number. These biometric data is unique for the every person. No two people have the same fingerprints or iris image. Thus, your Aadhar number can be verified by your bio-metrics easily. This biometric authentication makes Aadhar the perfect proof for the banking transactions. Indeed, It has replaced the signature as the better option.

How it works:

1. The merchant needs to download the Aadhar Pay application on the Android smartphone which is connected to a biometric scan machine. (The biometric scan machine is available at a cost around Rs. 2000.)
2. Merchants would be required to register themselves on the app and connect their bank accounts where they want to receive payments from customers.
3. If a customer wants to make payment, then he/she just need to enter his Aadhar Number in the app 
4. Linked bank name will open up, then the customer will select the bank from linked bank list and the merchant will enter the amount.
5. The app will ask for biometric scan input of customer. The biometric scan would work as the transaction password.
6. If the biometric scan is matched with the one with UIADI and if there is enough balance in selected bank account, the amount will be transferred to the bank account of the merchant.

Pros:

It's a very easy way of cashless transaction. Now central government has launched the app 'Aadhar Pay'.

Cons:

1. Unlike UPI, the AEPS is a relatively costly transaction. It can go up to Rs 15 for one transaction. On the other hand, UPI charge is free to nominal fee. For AEPS, three institutions involved can charge fees.
2. UIDAI (Unique Identification Authority of India) may charge a nominal fee for authentication, however, it is not charging yet.
3. The NPCI charges 10 paise for authentication and 25 paise for settlement.
4. The bank can charge 1% of the transaction value if it is related to another bank. The minimum fees for other bank transaction would be Rs 5 and maximum fees would be Rs 15.

Conclusion

AEPS may be costly than UPI and USSD but it gives a lot of convenience to the rural people. It would bring the bank to their doorstep and save much time and transport expense. It would be just like a visit to ATM at every doorstep. That is why government calls the POS as micro-ATM.