How Aadhaar is Powering Digital Payments in India

According to UIDAI, the statutory body responsible for Aadhaar enrolment and authentication, more than 99% of adult Indians now have the 12-digit Aadhaar Number. Among the many benefits of the Aadhaar program is the massive data repository of Indian citizens, which the government and the authorities can use in several ways to fuel the growth of our country.

For instance, with Aadhaar Enabled Payment System (AEPS), Aadhaar is powering digital banking in India. Let’s take a look at what this Aadhaar-based payment system is and how it works-

What is AEPS?

Aadhaar Enabled Payment System is a bank led model which allows bank customer to use Aadhaar as his/her identity to access his/her Aadhaar enabled bank account. (AEPS) was introduced to provide mainstream banking services to the underserved sections of society. With AEPS, Aadhaar Card holders can make financial transactions by completing Aadhaar-based verification.

AEPS allows users to transfer funds, deposit and withdraw cash, make payments, check Savings Account balances, and more.

Features and Benefits of AEPS

• The Aadhaar-based payment system is interoperable and can be used by people to send and receive money from various banks.
• By simply completing Aadhaar-based authentication, any bank account holder can access various financial and non-financial banking services with AEPS.
• As Aadhaar has an extensive reach across the country, the Aadhaar-based AEPS is an effective way to extend banking services to underserved areas.

How Does AEPS Work?

The Aadhaar Enabled Payment System app uses the Micro-ATM model, wherein Business Correspondents (BCs) are authorized to offer essential banking services. For instance, a grocery store owner in a village could register as a BC to start offering banking services in the local area.

The BCs are provided a Micro ATM machine, similar to a POS terminal, with a built-in scanner. The scanner scans the customers' fingerprints before allowing them to access the basic banking services of their Aadhaar-linked bank account. 

ther Aadhaar-Based Payment Services

The AEPS service is one of the many examples of how Aadhaar encourages digital banking in the country. There are other Aadhaar-based services and products like-

• Aadhaar Pay App

The Aadhaar Pay App was introduced to encourage cashless payments and make payment collection easier for merchants. The Aadhaar-based payment system eliminates the need for merchants to use any POS terminal or hardware to collect online payments.

With a simple mobile app, merchants can receive payments from customers, which are directly deposited into their bank accounts.

• Aadhaar Payment Bridge (APB)

The Aadhaar Payment Bridge, or APB, adds transparency to the government’s welfare schemes and ensures that welfare benefits reach the right people.

With this centralized Aadhaar payment system, government agencies can deposit welfare benefits into the Aadhaar-linked bank accounts of deserving recipients.

How is Aadhaar Transforming Digital Payments in India?

Aadhaar card and digital banking is a winning combination that has transformed how we bank. Innovative products and services like AEPS, Aadhaar Pay App, and APB are extending banking and financial services to the unbanked pockets of the country and providing people with a simple, quick, and transparent way to manage their everyday banking needs.