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March 12 2018


Aadhaar Enabled Payment System (AePS): Towards a Paperless Economy

One of the primary objectives of Aadhaar card is to ensure a uniform distribution of all government-funded financial products and services among the residents of India; especially to those who belong to the economically weaker section of the society.

To speed up the financial inclusion, the RBI in association with UIDAI conducted a Proof of Concept (PoC) which analysed the effectiveness of the quality and performance of micro ATMs linked to Aadhaar card.

What is AePS?

The Aadhaar Enabled Payment System (AePS) is a bank-led model that gives the power to a customer to access his/her Aadhaar-enabled bank account online by using his/her Aadhaar UID. By using AePS, one can have the advantage of managing all financial inclusion transactions at the Point of Sale (PoS). The AePS is especially helpful for people who live in the rural areas or belong to the economically weak section to conduct their financial transactions through the bank-enabled micro ATMs.

The technology of AePS functions in two ways –

  1. Instead of customers going to the bank, AePS enables banks to be available to them regardless of their current location.

  2. The AePS technology allows smooth functioning among the different systems used by different banks.


What are the objectives of AePS?

The AePS service is the Government of India’s approach to making business correspondence more accessible and interoperable. The main objectives of implementing the AePS technology are as follows –

  • To assist the Government of India and Reserve Bank of India in accelerating the process of Financial Inclusion.

  • To help RBI achieve the goal of implementing electronically-enabled retail payments.

  • To give the customers the power to access their Aadhaar-verified bank accounts by using their Aadhaar ID.

  • To enable a safe and secure interoperable system across different banks.

  • To achieve the dream of providing a full-range AePS banking service throughout the country.


What are the requirements for AePS?

The Aadhaar Enabled Payment System allows users to make financial transactions without producing any documents or plastic payment cards. To use AePS one needs to have the following –

  • Aadhaar UID

  • Name of the correspondent Bank

  • Fingerprint of the cardholder

Thus, with AePS one just needs to remember the Aadhaar number to make any financial transactions.

Services Offered by AePS

Individuals who want to make financial transactions through AePS can avail the following services –

•    Cash deposit

•    Cash withdrawal

•    Balance enquiry

•    Interoperable fund transfer among different banking networks

•    Obtain mini statement


Aadhaar-Enabled Payment System – How it works?

The technology of AePS is a breakthrough in its field since it only needs the Aadhaar number for the customers to access their bank accounts. And it is possible because, with the recent government mandate, Aadhaar card is being mandatorily linked to everyone’s bank account. Also, the fingerprint is scanned and authenticated by the UIDAI. When the customer makes a transaction request, UIDAI confirms the corresponding bank about the authenticity of the customer. Finally, after the authentication is complete, the bank gives the transaction a nod.

In short, the process of AePS includes the following steps –

  1. The bank customer provides his/her Aadhaar number, particulars of his/her financial transaction, and fingerprint impression at the microATM device.

  2. Then encrypted data packets with digital signatures are transferred via the Banking Correspondent to the National Payment Corporation of India (NPCI).

  3. The NPCI then forwards the information to UIDAI which in turn processes the authentication request and then confirms/rejects the process accordingly.

  4. If the request is confirmed, then the bank of the customer carries out instructions to the microATM and completes the rest of the transaction process.


Charges of AePS

The AePS, unlike UPI technology, is a paid transaction process. As much as Rs.15 can be charged for one transaction. The amount charged is divided among these three systems –

  1. UIDAI – Although the UIDAI service is not yet chargeable until December 2019, it might ask for a nominal fee for authentication.

  2. NPCE – NPCI charges 10 paisa per authentication and 25 paise for settlement.

  3. Bank – If the transaction amount is from another bank, then the customers’ bank charges 1% of the total amount of transaction. For transaction from other banks, the minimum fee is Rs.5, and the maximum is Rs.15.

Benefits of AePS

The cutting-edge technology of Aadhaar enabled Payment System is beneficial for the customers in quite a number of ways –

  • It allows the bank customers to use their Aadhaar-enabled bank accounts with the help of Aadhaar ID authentication.

  • Individuals can check the balance in their account, make cash deposits, withdraw and transfer money to other Aadhaar-enabled bank accounts.

  • To make a transaction, customers only have to provide their Aadhaar number and fingerprint impression to access their Aadhaar-linked bank accounts.

  • Through AePS people from the lower income group and those who live in the rural areas can make financial transactions through the microATMs installed by the banks.

  • Transactions made through AePS is safe, secure, and it is inter-operable among the different platforms of different banks.banks.

  • Transactions made through AePS is safe, secure, and it is inter-operable among the different platforms of different banks.

The transaction charge for AEPS might be more than any UPI-based transactions, but it is a lot more beneficial for people living in the rural areas. The AePS technology brings the bank to their doorsteps. AePS system not only saves time and energy but also serves as a doorstep ATM which is why PoS is also called a microATM.

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