Aadhaar-based payments make customers who do not have smartphones or who are uncomfortable using cards, transact digitally.
The Aadhaar Enabled Payment System (AePS), which was designed to encourage digital payments among the poor, has clocked more than 200 million transactions in July, regaining lost momentum.
More than 206 million successful AePS transactions were recorded in July, up 11% from 185 million in June, according to the National Payments Corporation of India’s latest data.
The figure had remained stagnant at around 150 million through the second half of 2018 after the Supreme Court banned private companies from accessing the Aadhaar database.
Aadhaar-based payments make customers who do not have smartphones or who are uncomfortable using cards, transact digitally. The platform is, however, being primarily used to withdraw cash by people who get direct benefit transfers, or subsidies, from the government, industry insiders pointed out.
The growth in AePS transactions is positive, industry insiders said, but more needs to be done to help the sector drive financial inclusion.
A top executive at a payments firm said, with the ATM infrastructure not expanding, customers in rural areas are making use of AePS to withdraw cash from their Jan Dhan accounts through local kirana (corner) stores. “But the Aadhaar Pay feature can be so helpful for much more than just cash withdrawal,” he added.
The Nandan Nilekani-led committee on Deepening Digital Payments said: “AEPS is the path to serving a very large number of users, the committee recommends that AEPS, and the Micro ATM must be reimagined…it must be re-architected to allow more services to be delivered to users.”
AePS has faced quite a few problems, with one of the biggest being interchange for off-us transactions. Interchange for off-us transactions is the price banks bear when their customers transact on terminals of other banks.
“Debates to reduce AePS interchange are discouraging, especially when ATMs are becoming unviable and their reach is limited. The debate to reduce AePS fee to less than Rs 15, when the ATM fee is being increased to Rs 17, is not a fair and considered view,” said Anand Kumar Bajaj, chief executive officer, Nearby Technologies.
Suspension of cash deposit services by NPCI since March 2018 is causing problems on the ground.
“AEPS Cash-in was a great service which balanced flow between deposits and withdrawal at the level of the BC (business correspondent). The whole financial inclusion industry is suffering due to few bad apples, who should have been penalized, instead of the current measures taken by banks,” said Sunil Kulkarni, joint managing director, Oxigen Service India.
Transaction failure is another major issue around AePS, and this has been flagged by both the Nilekani committee as well as NPCI.
In March, NPCI asked banks to create infrastructure to process 150 transactions per second on these rails and improve system capacity. The Nilekani committee said despite the growth of financial inclusion over the years, banks have not expanded their systems, causing a bulk of the failures.
“AePS can be a strong system to help the rural population of the country go digital, it is showing early signs of faster adoption, but more needs to be done,” said the executive quoted above.
Publication – The Economic Times
Published Date – August 12, 2019