Aadhaar Enabled Payments

Introduction

Financial inclusion is expected to be a key application of Aadhaar authentication. Adoption of Aadhaar and Aadhaar authentication in Indian banking system is expected to change the financial landscape of country.

To enable same, UIDAI has partnered with various stakeholders including RBI, NPCI, IBA and banks to develop two key platforms:

  • Aadhaar Payments Bridge (APB) – A system that facilitates seamless transfer of all welfare scheme payments to beneficiary residents' Aadhaar Enabled Bank Account (AEBA)
  • Aadhaar Enabled Payment System (AEPS) – A system that leverages Aadhaar online authentication and enables AEBAs to be operated in anytime-anywhere banking mode by the marginalized d financially excluded segments of society through microATMs
Aadhaar Payments Bridge

APB is a repository of Aadhaar number of residents and their primary bank account number used for receiving all social security and entitlement payments from various government agencies.

It requires using Aadhaar number as the primary key for all entitlement payments. This would weed out all fakes and ghosts from the system and ensure that the benefits reach the intended beneficiaries.

This benefit has an even greater ramification as more and more social security programs are moving from in-kind to in-cash subsidies.

APB Process Steps

The key steps in posting payments via APB are:

  • Service delivery agency that needs to make payments to its beneficiaries (such as MGNREGA wages, scholarships disbursement, old age pension etc.) provides APB File containing details of Aadhaar number, welfare scheme reference number and the amount to be paid to its bank (called sponsor bank).
  • Sponsor bank adds bank IIN (Institute Identification Number provided by NPCI to participant banks) to the APB file and uploads onto NPCI server.
  • NPCI processes uploaded files, prepares beneficiary bank files and generates settlement file
  • Settlement file is posted to bank accounts with RBI.
  • Destination banks can download the incoming files for credit processing after the settlement file has been processed.
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Aadhaar Enabled Payment System

The Report of the Committee on Financial Inclusion chaired by Dr. C. Rangarajan, made two important observations:

  • Technology has to enable the banks to go where the customer is present, instead of the other way around.
  • Technology should allow interoperability among different systems adopted by different banks.

The Aadhaar Payment System is intended to address both the above issues.

AEPS empowers the marginalised and excluded segments to conduct financial transactions (Credit, Debit, Remittances, Balance Enquiry, etc) through microATMs deployed by Banks in their villages.

AEPS Process Steps

The key steps in doing transactions via AEPS are:

  • Resident provides his/her Aadhaar number, details of financial transaction sought and fingerprint impression at the microATM device.
  • Digitally signed and encrypted data packets are transferred via Bank Switch to NPCI to UIDAI.
  • UIDAI processes the authentication request and communicates the outcome in form of Yes/No.
  • If the authentication response is Yes, bank carries out the required authorization process and advises microATM on suitable next steps.