The govt has asked RBI to fix responsibilities for stakeholders, including PoS manufactures, UIDAI that administers the 12-digit Aadhaar number, and the NPCI to launch the process
New Delhi: The finance ministry has asked the Reserve Bank of India (RBI) to bring together all stakeholders, including banks and back-end service providers, and establish a process for the roll-out of Aadhaar-based point of sales (PoS) machines to promote cashless transactions.
In his budget speech last month, finance minister Arun Jaitley said two million Aadhaar-based PoS machines will be rolled out by September-end. Banks have flagged the lack of an established back-end infrastructure as an impediment in implementing this mandate.
The government has now asked RBI to fix responsibilities for stakeholders, including PoS manufactures, back-end service providers, banks, and the Unique Identification Authority of India (UIDAI) that administers the 12-digit Aadhaar number, and the National Payments Corporation of India (NPCI) to launch the process.
“For Aadhaar-based PoS machines to be a reality, many systems and processes have to be put in place. The biometric data captured on these machines has to be encrypted and transmitted after which Aadhaar authentication has to be done. The payment then has to be processed. For this, all the stakeholders have to be brought together by RBI and the process established,” said a senior finance ministry official, who did not wish to be identified.
This is not the first time that an Aadhaar-based authentication process has been proposed. RBI, in a notification in September 2016, made it mandatory for all banks to ensure that all new card acceptance infrastructure deployed from 1 January, 2017 is enabled for processing payment transactions using Aadhaar-based biometric authentication. After banks raised concerns about a mismatch between demand and supply of such Aadhaar-enabled devices, the central bank gave banks time till end-June to deploy this infrastructure.
Deepak Bhutra, chief executive officer, India Transact Services Ltd, a merchant payment solutions firm, said it is possible to shift to new age biometric payment systems. “This is not technically a difficult task but rather a very expensive one. Companies will have to invest in securing these biometric readers and assembling them in the currently available PoS machines,” he said in an email. “We do see faster acceptance of the PoS machines now with the push from the government, but a major challenge would be to educate the customer to pay through Aadhaar payment method as opposed to paying via the card route,” he added.
“There are a few things which banks will incrementally have to follow. Firstly, banks will need to get certified with NPCI for AEPS (Aadhaar- enabled payment system) switching capability which will have to be managed or outsourced by the bank. Secondly, deployment of a merchant app with low cost peripheral, to enable Aadhaar biometric authentication is needed. Lastly, banks would need to upgrade their existing EDC (electronic draft capture) PoS or mPoS terminals to support biometric capture which may work out to be more costly and much less scalable,” Deepak Sharma, chief digital officer, Kotak Mahindra Bank, said in response to emailed questions.
“From a consumer perspective, the Aadhaar-based payment methodology will work even in the absence of feature phones and high-end smart phones—which addresses a significant part of the population at the bottom of the pyramid,” added Sharma.
An IDFC Bank official said the target is easily achievable if new age banks adopt this route. “The bank has an ambitious roll-out plan for both Aadhaar Pay as well as micro ATMs,” the official added on condition of anonymity.
Aadhaar Pay is a service for merchants that will enable them to receive payments from customers without any physical payment instrument. The app has to be downloaded by merchants on their phones and linked to an Aadhaar biometric reader. Once the merchant has this infrastructure in place, consumers can start transacting.