The government in collaboration with the Reserve Bank of India (RBI) and the Unique Identification Authority of India (UIDAI) is continuously working towards implementing digital payment modes to encourage cashless society. As a result, the government is pushing Aadhaar linked payment systems which will eventually eliminate debit/credit cards.
The current forms of digital payments like credit/debit cards, internet banking, and even mobile wallets require the vendors to pay some charges for using the technology, However, with the Aadhaar linked payment modes like Aadhaar Payment app the merchants do not have to pay any fee for using the technology. Hence, the Aadhaar Enabled Payment System (AEPS) can work as a boon for the vendors.
How efficient are Aadhaar linked payments
The government, since the launch of Aadhaar card, is encouraging citizens to link their savings accounts with it. The government soon launched the Adhaar Payment app which requires only the Aadhaar number and the fingerprint of the payer as the authorisation code to make payments.
The vendors, on the other hand, have to install the app on their smartphone and keep a biometric machine to scan the fingerprints of the customer. In fact, the customer need not even have the Aadhaar Payment app to pay the vendor. He just needs to remember his Aadhaar number and provide his fingerprints for payment.
Neither the merchant nor the customer needs to remember any bank account or card detail to make or accept payments. Hence, the bank account and debit/credit card details are safe and unknown to others.
How Aadhaar linked payments are revolutionizing digital transactions
According to UIDAI, whenever a merchant transacts with a customer through Aadhaar Enabled Payment System, the merchant is enlisted as a business correspondent and receives the same benefits as the business correspondents of the various banks.
The benefits to the business correspondents vary as per their bank. For instance, if a customer makes a deposit using the PoS machines, the correspondent gets 0.5% of the money deposited. When more and more merchants would use Aadhaar Payment app for transactions, the number of business correspondents in the market will eventually reduce.
Moreover, the PoS machines are not sold but most of the times given on rent to the merchants by the banks, which again is an extra burden on the merchant. In addition to the machine rental, the banks also levy the vendor with transaction charges every time a card is swiped through the PoS terminal.
According to the recent figures, transactions through PoS machines using debit cards went up from 14,800 crores in 2015 to 31,600 crores in 2016. After demonetization, mobile wallet usage also surged to 3,300 crores in 2016 from 1,900 crores in 2015. Mobile wallets even charge the merchants up to 4% as the fee on certain transactions.
To eliminate the extra costs borne by the vendor and any scope of mediators like mobile wallets, the Aadhaar Enabled Payment System comes into the picture, which will eliminate the usage of not just the plastic cards but even the Point of Sale (PoS) machines.
The merchants need not pay any fee or transaction charges whatsoever to the bank on accepting payments using Aadhaar cards. The full transaction amount would hence be credited to the merchants account. The merchants no longer are required to pay rentals for PoS terminals, as they can buy the biometric scanners online or at a store.
With all the facts and discussions running currently, it is clearly evident that Aadhaar Linked Payments are here to change the game in digital transactions and hence make India an entirely cashless society.
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