Bharat SainiLast Updated on May 13, 2017 by Bharat Saini
BHIM-Aadhaar Pay app, launched by Prime Minister Narendra Modi on April 14, 2017, on the occasion of the 126th birth anniversary of Dr. B. R. Ambedkar, is a system which allows payment through thumb impression. It is a robust, secure and user friendly digital ecosystem for citizens that will be seen as the foundation for an economic revolution in the world. Putting in place yet another keystone of a digital payment system that will help India make the shift to a less-cash economy, Modi hoped that this digital platform would be an “economic giant’ like the Constitution, through which Dr. Ambedkar empowered the common man. The biometric-based indigenous payment solution will enable real-time bank-to-bank money transfers even for those without a phone and at no additional cost.
BHIM-Aadhaar pay app is developed only for merchants and makes use of two major platforms developed by the government—Aadhaar Enabled Payment System (AEPS) for authentication and Aadhaar Payment Bridge (APB) that acts as a repository.
BHIM-Aadhaar Pay app, the thumbprint-enabled payments presuppose people have bank accounts and also money in those accounts. The app is available, on both Android and iOS, for download to merchants across the country, and merchants need to keep a biometric sensor connected to the phone for authentication; apart from signing in to the app after a KYC. The app, links customer’s Aadhaar number and biometric fingerprint to complete a transaction as under:
- Merchant requests payment for purchase using the Aadhaar number linked to bank account.
- Customer keeps his finger on the biometric machine connected to the app through the merchant’s Smartphone.
- The app queries the Aadhaar database to identify the owner of the print and his Aadhaar number and authenticates the customer using two unique credentials – the Aadhaar ID and his fingerprint sensor.
- If multiple accounts are linked to customer Aadhaar card, it may also give an option to select which account the customer needs to use to make the payment.
- Then a separate transaction deducts the amount to be paid from the bank account of the customer linked to that Aadhaar number and credits it to the account of the Merchant linked to the terminal capturing the thumbprint to complete the transaction.
The transactions make use of the National Payments Corporation of India’s facilities, and, presumably, it would be reimbursed the cost of running these two ‘bridges’, from the government’s Financial Inclusion Fund. The merchant and the consumer are spared any charge for making the payment digitally. This makes cashless payment more prevalent, possibly more easy and hassle-free. Using cash and holding it is expensive for the system. Banks have to incur expenses on transport of money to different branches, stuff ATMs, spend money on guards, Note counting & sorting machines, etc. Shops and establishments have to pay for security. Customers will also continue to earn interest on their balances in savings accounts till the amount is debited to the accounts.
It is a huge opportunity for enabling digital transactions as about 99% of adult population is now Aadhaar-enabled. All the major banks are now on board with more than 7 lakh merchants and they can start accepting payments using BHIM Aadhaar app. BHIM (Bharat Interface for Money) app has already created a new world record by registering 1.9 crore downloads in just four months since its launch in December 2016. India has also seen an unprecedented increase in the number of transactions made using several user-friendly digital payment methods. According to government estimates, the volume of digital transactions increased about 23 times to 6.38 million for a value of Rs. 2,425 crore in March, 2017; compared with volume of all digital transactions at 280000, worth Rs. 101 crore until November 2016. Almost 40 crore bank accounts are already linked to Aadhaar. Many new languages have been introduced in the app, including Bengali, Gujarati, Malayalam, Tamil, Odiya, and Telugu. BHIM App will also have a new feature of spam report to block unwanted and unknown payment requests.
BHIM-Aadhaar Pay app also known as Aadhaar Pay portends demise of debit card-based transactions and associated merchant discount rates. Customers do not need a debit card or credit card for payments through Aadhaar Pay. Also, Aadhaar Pay would end need to have an internet connection, many payment apps, or POS machines. Aadhaar Pay would not charge Merchant Discount Rate or any other such charge paid by the merchants to a bank for accepting digital transactions through credit or debit cards. While customers won’t have to pay any additional charges, merchants and banks will get an incentive of 0.25% of transaction value for each one via the BHIM-Aadhaar platform.
The Unified Payment Interface (UPI), BHIM, Bharat QR code and Aadhaar Pay form the basis of a digital payment ecosystem that’s part of the government’s initiative to reduce the dependence on cash, track transactions and end the scourge of black money. Demonetisation, announced on November 8, was another big part of this.
BHIM-Aadhaar Pay app will boost “transparency and honesty”, as broad adoption of such digital payments would bring an expanding share of the informal economy to the formal sector. According to Law and IT minister Ravi Shankar Prasad, “the essence and the idea behind the PM’s ‘Digital India’ initiative is that if we send Rs. 100 from Delhi, then it must fully reach the poor beneficiary. That is the reason some 28 crore bank accounts have been opened for the poor in the last two years.” Country has saved Rs. 49,000 crore by linking Aadhaar with various welfare schemes to bank account of beneficiaries are linked with Aadhaar and money comes directly into those accounts, and all middlemen are eradicated.”
Prime Minister Modi has also announced two incentive schemes with an outlay of Rs. 495 crore for six months: a referral bonus for consumers and a cash-back scheme for merchants. A referral scheme that has been announced means that users will get Rs. 10 for each friend he/she refers to.
Prime Minister revealed that leaders of African countries have evinced interest in this path breaking initiative and India held potential to become a “catalytic agent” for this use of technology at the global level. It is only matter of time that the global universities will flock India for the case study of BHIM-Aadhaar Pay app and Prime Minister has asked to get the entire initiative patented as the entire world is looking forward to replicate this model in their respective countries is showing curious interest in it.
