Aadhaar-Enabled Payment System, What Is It?

In these digital times, an average customer is now spoilt for choice in terms of payment options as keeping cash in the pocket is fast becoming old fashioned.

What to say of cash payment, the rate at which digital payment options are rising, even the "modern" method of paying through credit and debit cards, is rapidly becoming extinct.

Among various methods of digital payments, the Government has been promoting Aadhaar enabled payment system or AePS. It is mostly used by beneficiaries of centrally sponsored schemes for subsidy payments.

What is AePS? 

Aadhaar Enabled Payment System (AePS) is a bank led model which allows online interoperable financial transactions in accounts including accounts of beneficiaries of Direct Benefit Transfer (DBT), through business correspondents (BCs), using Aadhaar-based biometric authentication.

Banks offer this service to their customer to access their respective Aadhaar enabled bank account and perform basic banking transactions like cash deposit, cash withdrawal, intrabank or interbank fund transfer, balance enquiry and obtaining mini statement through a BC.

What are the issues affecting this system?

There have been a rise in complaints of transaction failures under this payment system, which has forced the Government to adopt various measures to reduce the number of declines. 

National Payments Corporation of India (NPCI) has said that it has taken various steps for reduction of declines.

Steps to check cases of declining transactions

NPCI has a 24x7 technical support team including the network team, which tracks incidents and assists the banks in the closure of the incident.

NPCI escalates the matter to the senior management of the banks if they are having more than one lakh transactions declines per day.

Technical taskforce is created for all online products to help banks to work towards reducing the technical declines. Further, regular review is also done by Government periodically to contain the technical declines of AePS transactions.

Intervention by RBI

RBI has apprised that to strengthen the BC ecosystem, it has prescribed the framework for development of Business Correspondent Registry Portal to Indian Banks' Association (IBA).

The BC registry portal provides a centralised repository of relevant information on BCs, which captures basic demographic details, concerned bank and corporate BC details, along with location of BCs, nature of operations, qualifications, gender, etc.

In the event of any malpractice or frauds, banks have the option to blacklist BCs on the portal, details of which are made available to all the stakeholders. Details of all Business Correspondents which have been blocked or blacklisted are consolidated by NPCI and circulated periodically to all member banks for the benefit of the BC ecosystem.