Are digital payments finally set to become easier for merchants as well as customers? The answer is yes if one goes by the government’s promise of introducing a universal app that merchants can use to accept payments even from people who don’t have a mobile phone or a debit card. The only thing you need is a bank account linked to your Aadhaar number.
While the formal launch of the government’s app is still awaited, banks like State Bank of India (SBI) and IDFC Bank Ltd have launched their Aadhaar-based payment systems. On Saturday, SBI adopted Shirki Village in Maharashtra to make it completely cashless on the back of its Aadhaar enabled payment solution. IDFC Bank, too, launched its Aadhaar-based platform over the weekend. Both lenders promised a payment experience more seamless than any other.
Mrutyunjay Mahapatra, deputy managing director at SBI, said in a media statement
Rajiv Lall, founder and chief executive officer of IDFC Bank had a similar pitch to make and said in a statement that even “citizens in the deepest corners of the country can participate in India’s digital movement” if they have a Aadhaar-linked bank account.
How Do These Apps Work?
IDFC Bank’s Aadhaar Pay app gives us some idea of how these payment systems will work. The app, which can be installed on a retailer’s smartphone, just needs a biometric device which scans a customer’s fingerprints for authenticating transactions. The customer just needs to know the name of the bank.
The bank has already onboarded 100 merchants who are using the Aadhaar-based payments app, said an official from the bank requesting anonymity. The government will be using IDFC’s app to model the umbrella app that they intend to launch, this official added. Apart from the convenience of paying with a tap of a thumb, the Aadhaar-based payment app may also end up being cheaper than payment systems (like credit and debit cards) which use Point-of-Sale (PoS) machines.
There is a merchant discount rate (MDR) of about 1.0-2.5 percent involved in card transactions done through PoS machines which the merchants are required to pay. Aadhaar-based payments, meanwhile, happen at a much lower cost since there’s no MDR involved, the IDFC official said.
This is because the network is developed by the National Payments Corporation of India (NPCI) on the existing Aadhaar Enabled Payments Systems (AEPS) railroad used to authenticate customers at public distribution centres. In merchant transactions, the same infrastructure is being utilised to authenticate customers as well as their bank accounts.
A white paper on service delivery using Aadhaar published in 2012 said
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