Skip to main content

Aadhar Enabled Payment System (AEPS) -The Game Changer for India’s Financial Landscape

The Government of India estimates that there are now over 30 crore accounts opened under the Pradhan Mantri Jan Dhan Yojana, of which more than 18 crores are in rural and semi urban bank branches. By some estimates, over 99% of Indian households now have access to the formal banking system.  UIDAI reports are that there are already 118 crores Indians holding Aadhar Cards. Given thismassive acceptance, combining the initiatives to create a transformational synergy was a move that was, in many ways, inevitable.This is the beauty of the Aadhar Enabled Payment System (AEPS), a system that is already radically altering the digital payments landscape of India by making it accessible to India’s vast rural sector.

AEPS from National Payments Corporation of India (NPCI), is a way for users with both an Aadhar number and a bank account to access the account and carry out some basic transactions even without debit card, signature, or phone.The users must link their bank accounts and their Aadhar number, already mandatory for all citizens, and then each time they want to transact, a micro-ATM allows them to do so by biometrically authenticating them. Users can do transactions like Balance Enquiry, Cash Withdrawal, Cash Deposit, Aadhar to Aadhar funds transfer, and even payments to businesses and various government entities. At the frontlines of this system are the 1.3 lakh+ micro-ATMs and the 1.26 lakh Bank Mitras (Business Correspondents) stationed around the country.

The true success of the AEPS is how it has helped to demolish all the entry barriers that the rural population faced in adopting the digital way. AEPS truly brings banking to where the mass population is present rather than the other way around.

Concerns were raised about lack of education of rural consumers and a presumed lower understanding of banking norms. The constrained access to digital infrastructure and security issues related to personal identity were also highlighted. With AEPS,consumers do not need to do any paperwork, can access a controlled, but still valuable set of banking transactions over basic infrastructure available in their vicinity and most importantly be sure that their security is not compromised. This has made digital payments more simple and accessible to more digitally-disadvantaged rural population.

Another crucial advantage of AEPS is the transparency. In May of this year, government data showed that 78% of the country’s ration cards had been seeded with Aadhar data – effectively ensuring that the subsidy benefits available through the Fair Price Shops are transparently transferred to the rightful beneficiaries. 

Banks have traditionally shied away from expanding into rural India because of the prohibitive costs of setting up branch and ATM networks. This has been considerably eased with the coming of AEPS. For one, the infrastructure required by the merchant or the BC offering AEPS is minimal just a micro ATM- a biometric authentication enabled hand help device which brings banking at the doorstep. Secondly, interoperability between the vast majorities of Regional Rural Banks that AEPS has enabled has effectively widened the accessible network for the benefit of consumers who can now transact at any bank’s BC.

Post demonetization, it is this accessibility that is driving the adoption of AEPS. The NPCI reports that in Oct 2016 there were over 3.51 crore AEPS transactions. In July, this year that number surged to over 10.19 crore – nearly a 3-fold increase. Rural transactions also rose sharply from 2.1 million in December 2016 to over 6 million in April 2017. The variety of transactions is also growing. In July, this year 70% of the transactions still related to cash deposits and withdrawals and 30% of the transactions were about balance enquiry and funds transfer. There seems clear evidence that the rural consumer is getting used to transacting digitally and becoming more sophisticated at doing so. 

Jose Thattil, CEO of Phi Commerce says, “India’s rural market will be the next great growth engine for the economy with its 850 million consumers who already contribute half of the nation’s GDP. The rural consumer is aspirational, wants to purchase high-quality products, and increasingly also has the means to do so. In this scenario, it’s my belief that AEPS will be at the forefront of a digital payments surge in India – driven by the newly-digital rural consumer.”


Popular posts from this blog

Cloud Computing powering India’s priority of ‘Digital-first country’

By: Sunil Mahale, India MD and VP, Nutanix
Digital transformation has been recognized as being vital to the growth of our nation. This transformation has enjoyed the unanimous approval and contribution from all stake holders including enterprises, MSMEs, government bodies and citizens. But this level of adoption in a country with a population of over a billion people would need a robust technology base that is capable to collecting and distributing vital data seamlessly.
Digital India envisions creating high speed digital highways, that will impact commerce and create a digital footprint for every individual. Technologies based on mobility, analytics, Internet of things and most importantly, cloud technologies are the building blocks for the digital India missionThere is a growing need to manage huge volumes of data, and making them readily available to public through digital cloud services. Cloud has a pivotal role in enabling this change.
While Data centers have become crucial to th…

RevStart launches its RevItUp Incubation Programme

Underlining its vision of creating a nurturing ecosystem for start-ups to grow in, RevStart, a co-working and incubation centre, has announced the launch of its RevItUp Incubation Programme. The 12-week long programme will be held at RevStart Incubation Centre in Noida from July 1, 2018 onwards. As part of the programme, RevStart will select five high potential start-ups from the ed-tech sector, AI, Consumer Internet, Sustainability, as well as for-profit social impact companies to assist them with developing their business, along with connecting them to global mentors across industries and sectors. In addition, start-ups selected for the programme will receive INR 5 lakh to Rs. 25 lakhs worth of cash and benefits, while RevStart will get an equity stake in the ventures.
The RevItUp Incubation Programme has been created to enhance the founding team’s industry, product, and company building knowledge and capabilities through a world-class curriculum. The programme will focus on tailor…

Insurtech startup Kruzr raises $1.3 Million from Saama Capital and Better Capital

InsurTech startup Kruzr has raised 1.3 Million USD (Rs. 9.5 Cr) for its seed round led by Saama Capital with participation from Better Capital. Kruzr is a preventive motor insurance technology which helps insurance companies personalize policy premiums & improve their risk model by delivering an engaging preventative driving assistant to their customers. Kruzr is founded by Pallav Singh, Ayan, and Jasmeet Singh Sethi.

Kruzr blends the power of voice technology and artificial intelligence in its personal driving assistant that helps drivers minimize mobile distractions, drowsy driving, speeding and external risks like weather and accident-prone zones. In pilots with insurers, Kruzr managed to cut down distracted driving by 80%. Kruzr is working with motor insurance companies in Europe, UK and India to bring its technology to their customers to prevent accidents & improve claims.

“Road accidents cause over 1.3 million deaths globally every year, and motor insurance companies los…