BACKGROUND

In order to further speed track Financial Inclusion in the country, Two Working Groups were
constituted by RBI on MicroATM standards and Central Infrastructure & Connectivity for
Aadhaar based financial inclusion transactions with members representing RBI, Unique
Identification Authority of India, NPCI, Institute for Development and Research in Banking
Technology and some special invitees representing banks and research institutions.

The working group on MicroATM standards & Central Infrastructure & Connectivity has
submitted its report to RBI. As a part of the working group it was proposed to conduct a Lab
level Proof of concept (PoC), integrating the authentication & encryption standards of UIDAI, to
test the efficacy of MicroATM standards and transactions using Aadhaar before they are put to
actual use. The PoC was successfully demonstrated at various venues.

AePS is a bank led model which allows online interoperable financial inclusion transaction at
PoS (MicroATM) through the Business correspondent of any bank using the Aadhaar
authentication.AePS allows you to do six types of transactions.

The only inputs required for a customer to do a transaction under this scenario are:-

 IIN (Identifying the Bank to which the customer is associated)

 Aadhaar Number

 Fingerprint captured during their enrollment

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 AADHAAR ENABLED PAYMENTS

INTRODUCTION

Aadhaar Enabled Payment System or AEPS is a payment service developed by the National
Payments Corporation of India (NPCI) allowing banks, financial institutions to use “Aadhaar”
number and online UIDAI authentication for transactions through their respective Business
correspondent service centres. AEPS, a new age banking service has been approved by the
Reserve Bank of India (RBI). It is also used for routing interbank ATM transactions and
Interbank Mobile Payment Service (IMPS). The AEPS allows transactions using Aadhaar and
biometric authentication and enables a person to carry out financial transaction on a micro-ATM
provided by a banking correspondent.

Spice Money, the financial technology service from Spice Digital, been authorized by the
National Payments Corporation of India (NPCI) to offer AEPS services since October, 2016. It is
a unique and innovative system that allows trader/merchant to collect payment, operate as mini
ATM for cash withdrawal, deposits and balance enquiry using Aadhaar Enabled Payment
System.

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

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HOW AADHAR PAY WORKS?

Ever since UPI or Unified Payment Interface has been launched, a number of changes and
revolutions in terms of the country’s economy has been guaranteed. Aadhaar Payments or AEPS
is a result of this and has been formally announced now. This feature will also roll out soon
enabling individuals to use only their Aadhaar number and biometric information to receive and
send money.

UPI is referred to a payment system wherein money transfer can occur between two bank
accounts by using smartphones. This can be done both online and offline and eliminates the need
to type in card details, IFSC codes and so on. Aadhaar payments are a result of this.

IFDC Banks has launched an Aadhaar-linked cashless solution through which a customer can
use his/her phone to enable digital payments. This has been names as ‘Aadhaar Pay’ and was
launched in association with IDFC Bank, UIDAI and NPCI. This method has been sent out to
100 merchants so far and uses UPI and Aadhaar for payments. State Bank of India has also
announced that a village in Maharashtra, Shirki village has been adopted by them. The merchants
in this village have all been provided with smartphones and fingerprint scanners in order to help
them move away from cash.

WHAT IS AADHAAR PAYMENTS?

UPI allows individuals to transfer money to another person using the IMPS method of payment
wherein bank account details or IFSC code is not necessary. Only the virtual identity of the
individual should be known, such as their mobile number or email address. Aadhaar is the
supporting infrastructure for UPI and enables AEPS. In a nutshell, it means that Aadhaar
biometric information can be used to authenticate payments from the individual’s linked bank
account.

HOW CAN INDIVIDUALS PAY?

Individuals will have to first procure an Aadhaar card and then link the same to their bank
account. The merchant to whom payment has to be made will also have to support Aadhaar
payment and have the relevant infrastructure for the same as well. In case this facility is available

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 at all stores, then individuals will only have to provide their Aadhaar number and then have their
fingerprint scanned. The linked bank will have to be selected after which payment will take
place. Hence, payment becomes very simple and hassle free.

The country is moving towards digital payments and through the usage of UPI and AEPS,
digitization is possible a lot more faster. Customers and merchants will only need to have
smartphones, an Aadhaar card, and link their bank account to the same. Through these methods,
individuals from even the most remote corners of the country can participate in digitization.

BENEFITS OF AEPS

1. The Aadhaar Enabled Payments System (AEPS) is a simple to use, safe and secure platform to
avail benefits of using the Aadhaar number for conducting transactions.

2. The AEPS system uses biometric authentication of the individual, eliminating the possibility of
fraud or non-genuine activity.

3. The AEPS system facilitates inter-operability between banks in a safe and secure manner.

4. The AEPS system has allowed banks to financially include more individuals and has permitted
banks to reach customers they would not have been able to otherwise.

5. The AEPS allows customers to carry out basic banking activities without having to furnish
sensitive bank account details.

THE INPUTS REQUIRED BY THE CUSTOMER

 The Issuer Identification Number (IIN

The Issuer Identification Number is a six digit code that is unique for every card user, this
number is used to identify the issuing financial institution for the credit, debit, or any other card.
This number is only used to identify the financial institution and not does not identify any
product or service related to the card user.

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 Aadhaar Number

The Aadhaar Number is a 12-digit Unique Identification Number (UID) being issued by the
Unique Identification Authority of India (UIDAI) to all citizens of India free of charge. The UID
is stored in a secure centralized database and basic demographic information and biometric
information, such as, a photograph, ten fingerprints and an iris scan of the individual are linked
to this number.

 Fingerprint

A fingerprint scan of the individual is required to complete a transaction as it will be

authenticated against the fingerprint scan taken during the time of enrolment.

CUSTOMER PARTICIPATION

 All residents of India possessing an Aadhaar number which is linked to a bank account and
willing to use the service of a Business Correspondent of a bank will be included in the AEPS.

 For financial inclusion of their customers LIC and banks act as registrars to the Unique
Identification Authority of India (UIDAI) and will enrol their customers.

 Banks, acting as registrars to the UIDAI can opt to provide their customers with an Aadhar-
linked card to facilitate Interoperability between urban ATMs and MicroATMs for financial
inclusion of customers.

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 AADHAAR ENABLED INTERBANK TRANSACTIONS

All Aadhaar initiated interbank transactions are routed through the National Payments
Corporation of India (NPCI). There are four Aadhar enabled basic interbank transactions that can
take place:

 Cash Withdrawal through a Business Correspondent

Under the AEPS a customer can make a cash withdrawal through a MicroATM of the Business
Correspondent. The cash withdrawal initially flows through the Correspondent bank of the
Business Correspondent (BC). If the transaction is intrabank, on Aadhaar authentication, the
bank will debit the customer’s account and will send a positive response via the MicroATM. In
case of interbank transactions the transaction will be forwarded to the Issuer Bank via the
NPCI’s switch. On successful authentication of the Aadhaar the Issuer Bank will debit the
Aadhaar enabled account of the customer and will send a positive response to the MicroATM
through the NPCI switch.

 Cash deposit through a Business Correspondent

A cash deposit transaction initiated by a Business Correspondent initially flows through the
correspondent bank of the Business Correspondent. If the transaction is intra-bank, on successful
authentication of the Aadhaar, the customer’s account will be credited and a positive response
will be sent to the MicroATM. If the transaction is inter-bank, the transaction will be sent to the
NPCI’s switch to be forwarded to the Issuer Bank.

 Aadhaar to Aadhaar fund transfer

When a Funds Transfer transaction is initiated through the MicroATM of a Business

Correspondent, the Remitting Bank will first get the transaction Aadhaar authenticated. Upon
successfully authenticating the Aadhaar, the bank debits the Aadhaar enabled account of the
initiating customer with the amount to be remitted and proceeds to send a Payment Request to
the Beneficiary’s Bank based on the IIN provided, via the NPCI Switch. Beneficiary’s Bank will
credit the Beneficiary’s Aadhaar enabled account and forward its positive response to the
MicroATM that initiated the request, through NPCI switch. The customer will know the finality
of the remittance from the Transaction Receipt.
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 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.

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.

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 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.

AADHAAR PAYMENT BRIDGE SYSTEM

Aadhaar Payments Bridge System or APBS is a payment gateway platform created by National
Payments Corporation of India. It is used for Aadhaar schemes. it was used for the first time on 1
January 2013 when Direct Benefit Transfer was launched by Government of India.

Schemes including social security pensions, payments under the employment guarantee scheme,
public distribution system, and stipend to the children returned to schools from work, Janani
Suraksha Yojana, and scholarships will be covered under the Aadhaar Enabled Payment System.
Micro ATM cards have been provided to beneficiaries under various schemes and the use of the
card has been demonstrated to them. Almost seventy-five per cent of the beneficiaries have been
provided with the ATM cards for direct cash transfer into their bank accounts. Both public and
private sector banks have been drawn to provide micro ATM services.

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 OBJECTIVES

 To empower a bank customer to use Aadhaar as his/her identity to access his/ her respective
Aadhaar enabled bank account and perform basic banking transactions like cash deposit, cash
withdrawal, Intrabank or interbank fund transfer, balance enquiry and obtain a mini statement
through a Business Correspondent

 To sub-serve the goal of Government of India (GoI) and Reserve Bank of India (RBI) in
furthering Financial Inclusion.

 To sub-serve the goal of RBI in electronification of retail payments.

 To enable banks to route the Aadhaar initiated interbank transactions through a central switching
and clearing agency.

 To facilitate disbursements of Government entitlements like NREGA, Social Security pension,

Handicapped Old Age Pension etc. of any Central or State Government bodies, using Aadhaar
and authentication thereof as supported by UIDAI.

 To facilitate inter-operability across banks in a safe and secured manner.

 To build the foundation for a full range of Aadhaar enabled Banking services.

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SERVICES OFFERED BY AEPS

Cash Withdrawal – Mini-ATM

Spice Money retail counters now offer the Aadhaar enabled Mini-ATM services. Now you can easily withdraw
cash from your bank account without going to the bank. Go to any of the Spice Money stores and withdraw the
required amount of cash by just providing your Aadhaar number, bank name and thumb/finger impression.

Cash Deposit

Now you can deposit cash by just walking into any of the Spice Money centres. All you need to do is give your
Aadhaar number, bank name and thumb/finger impression. This facility is available in non-banking hours.
Hence, it is easy to access at anytime.

Balance Enquiry

Spice Money retail counters also help you to check your bank balance in your accounts. Visit any of the Spice
Money stores and give your Aadhaar details, bank name and fingerprint, and you will get your bank balance
detail on the screen.

With AEPS powered by Spice Money, cash withdrawal, cash deposit and checking balance is now easy,
secure and convenient.

BHIM AADHAAR PAY

BHIM Aadhaar Pay is meant for merchants to receive digital payments from customers over the
counter through Aadhaar authentication. It allows for any merchant associated with any
acquiring bank on BHIM Aadhaar Pay service, to allow the merchant to accept payment from a
customer of any bank, by authenticating the customer’s biometrics – currently only fingerprints,
directly from the customer’s Aadhaar enabled bank account and receive the sale proceeds
instantaneously directly into merchant’s own bank account.

To be able to effect the same, the merchant must have an Android mobile with the BHIM
Aadhaar app and a certified biometric scanner attached with the mobile phone on the USB port
AND both the merchant and customer should have had linked their Aadhaar numbers to their
bank accounts respectively.

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AADHAAR ENABLED PAYMENT SYSTEM (AEPS): BENEFITS AND
CHARGES

Aadhaar Enabled Payment System is a way to get money from the bank account. This system of
getting money neither requires your signature nor Debit card. You don’t even need to visit a
bank branch for getting money through the Aadhaar Enabled Payment System. Rather, it uses
Aadhaar data for the authentication. Like UPI and USSD, this is another initiative by the NPCI.

Benefits of Aadhaar Enabled Payment System

 You can perform financial and non-financial transaction through the banking
correspondent.

 A banking correspondent of any bank can do the specified transaction of any bank.

 There is no need of signature or debit card.

 It is fast and secure. No one can forge your fingerprint.

 Banking correspondent can reach to the distant rural place with the micro POS.

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TRANSACTIONS THROUGH THE AEPS

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

1. Balance Check

2. Cash Deposit

3. Cash Withdrawal

4. Aadhaar to Aadhaar Fund Transfer

Except Fund transfer, you can perform all the transactions through the banking correspondent of
any bank. For fund transfer, you need the BC of your own bank.

REQUIREMENTS FOR AEPS

Through the Aadhaar Enabled Payment System, you can get money without producing any paper
or card. However, your Aadhaar number should be registered with your bank account. If you did
not linked your Aadhaar with a bank account the Aadhaar Enabled Payment System would not
be useful to you. For AEPS transaction, you need following information.

1. Aadhaar Number

2. Bank IIN or Name

3. Fingerprint

It means, you have to only remember your Aadhaar number to do the bank transaction. It is just
like remembering own mobile number.

WHY AADHAAR FOR AUTHENTICATION

Remember, at the time of Aadhaar enrolment, your fingerprints and iris image were taken. These
biometric data gets linked to the given Aadhaar number. These biometric data is unique to a
person. No two person have the same iris image or fingerprints. Thus, your Aadhaar number can

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be verified by your finger prints. This biometric authentication makes Aadhaar the perfect proof
for the banking transactions. Indeed, It has replaced the signature.

HOW AADHAAR AUTHENTICATION WORKS

Suppose, you claim to be Vijay and produce the Aadhaar number of Vijay. To verify it, bank
official would take your fingerprints in a machine. The machine gives the fingerprint details
to Aadhaar Payment app. The app immediately tallies your fingerprints with the fingerprints of
the given Aadhaar. If it matches, the system would permit for the transaction. In case of
mismatch, the system would not do any transaction.

HOW AADHAAR ENABLED PAYMENT SYSTEM WORKS

It surprising that only through the Aadhaar number you can access your bank account. But it is
possible because the Aadhaar is linked to your bank account. This linking leads you to your bank
account. The fingerprint is authenticated by the UIDAI. In response to a transaction, UIDAI tells
to the bank about the authenticity of the user. Once, UIDAI authenticates, the bank gives green
signal to the transaction.

Thus, in the Aadhaar Enabled Payment System 6 institutions are involved.

1. You, the bank customer

2. Banking correspondent – The facilitator of AEPS

3. The bank of BC – The bank to which banking correspondent is attached

4. Your Bank – the bank with which you held the bank account

5. NPCI – It does switching, clearing and settlement of transactions

6. UIDAI – For finger-print authentication

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CHARGES OF AEPS

Unlike UPI, the AEPS is a relatively costly transaction. It can go upto Rs 15 for one transaction.
On the other hand UPI charge is free to nominal. For AEPS, three institution involved can charge
fees.

 UIDAI may charge a nominal fee for authentication, however it is not charging yet.

 The NPCI charges 10 Paise for authentication and 25 Paise for settlement.

 The bank can charge 1% of the transaction value if it is related to other bank. The
minimum fess for other bank transaction would be Rs 5 and maximum fees would be
Rs 15.

However, the union government would bear the cost of AEPS payment until 31 Decmeber 2019.
It is subsidizing debit card, UPI and AEPS MDR charge.

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5 SMART THINGS TO KNOW ABOUT AADHAAR-ENABLED PAYMENT
SYSTEM
1. AEPS enables bank customers to access their Aadhaar-linked bank accounts through the
Aadhaar authentication.

2. Customers can find out their account balance, deposit cash, withdraw money and transfer
funds to other Aadhaar-linked bank accounts through the help of business correspondents of any
bank.
3. The only inputs required from a customer for a transaction are the Aadhaar number and
fingerprint captured durin g the enrolment.

4. AEPS will allow inter-operability among different systems adopted by different banks in a
safe and secured manner.

5. AEPS is aimed at empowering the marginalised and excluded segments to conduct financial
transactions through micro ATMs deployed by banks in villages.

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CONCLUSION

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

Recently, government has launched the BHIM Aadhaar Pay system. It has the virtues of BHIM
app as well as AEPS. Using this platform, one can pay to merchant without the card or mobile.
The thumb impression is used for authentication.

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BIBLIOGRAPHY

 "About UIDAI". UIDAI. Retrieved 25 July 2017.

 "UIDAI Finance and Budge Section". UIDAI. Retrieved 6 June 2017.
 "Public Data Portal". UIDAI. Retrieved 1 Dec 2017.
 "Public Data Portal State Wise Saturation". UIDAI. Retrieved 24 Aug 2017.
 https://authportal.uidai.gov.in/home-articles?urlTitle=aadhaar-enabled-payments
 https://www.npci.org.in/product-overview/aeps-product-overview
 https://upipayments.co.in/aadhaar-enabled-payment-system/

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