Unique Identification Authority of India has indicated that it will be rolling out Aadhaar Pay app for merchants in the coming weeks. The program has been running as a pilot project in fair-price shops in Andhra Pradesh, according to a report in The Economic Times. The app will be based on Aadhaar-enabled payment system (AEPS) which is already being used by micro ATMs across the country.
The application is being developed by UIDAI in collaboration with TCS, and is available to banks to integrate with their applications. IDFC is one of the first banks to release an application that allows customers to pay merchants through AEPS. The merchant needs to pay for a biometric scanner that costs Rs 2,000, and IDFC is directly sending a link to the application to the registered mobile number of the merchants. The application by IDFC is not available on the Android app store.
The payments are authenticated through the biometric scanner. Shoppers do not need a plastic card, or a smartphone to make the transactions. An Aadhaar linked bank account, is however, a prerequisite for making the transactions. The limits on the transactions are left to the discretion of the banks. There are plans to eventually migrate the AEPS system to the BHIM system. UIDAI is ensuring security of the application with all the transmitted information having end to end encryption to prevent ‘man in the middle attacks’. UIDAI has indicated that security for the platform is paramount, and that they will constantly be upgrading the security measures.
The AEPS app for merchants faces a number of challenges. Biometric security is trivial to hack using low tech means. Users just have to take an imprint of the finger in wax, and use cheap glue to make a copy of the fingerprint to get past biometric security. Experts have also pointed out that biometric security is not infallible, and the marginal failure rate will affect a lot of people in a the large population of India. Fingerprint scanners for authentication of financial transactions has not found widespread acceptance even in mature markets. Finally, the large number of unbanked people in the remote and rural areas of India will not be able to use Aadhaar pay.