What Is AePS: Aadhaar Enabled Payment System Guide

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Aadhaar enabled payment system or the AePS is a bank-led payment model that allows all Aadhaar card holders to make monetary transactions at micro automated teller machines (ATMs) or point of sale (POS) using a unique identification number (UID).

The National Payment Corporation of India (NPCI) took this initiative to promote cashless transactions in India. Their main aim was to authorize people from all sections of the society to access financial and banking services via Aadhaar. The AePS allows users to transfer funds, deposit cash, withdraw money, check account balance, among other features.

Here’s a deep dive into how the AePS works.

What is AePS?

Aimed at empowering people to carry out banking and financial services like fund transfers, cash withdrawals, mini statements, balance inquiries, etc through a business correspondent, the Reserve Bank of India (RBI) and the Government of India to go cashless in retail payments by enabling Aadhaar-originated interbank transactions through centralized switching and clearing organizations.

To simplify payments of government schemes like social security pension, handicapped old age pension, National Rural Employment Guarantee Act (NREGA), etc. for any State or Central government bodies using Aadhaar, AePS is put to use.

Among services the AePS offers are:

Banking Services

• Aadhaar to Aadhaar Fund Transfer
• Cash Withdrawal
• BHIM Aadhaar Pay
• Authentication
• Cash Deposit
• Balance Enquiry
• Mini Statement

Other Services

• Aadhaar Seeding Status
• Best finger detection
• Demo Authorization
• Tokenization
• Electronic Know Your Customer or eKYC

How to Use AePS

The National Payments Corporation of India (NPCI) developed AePS to offer a wide range of objectives aimed at individuals or organizations that participate in the financial and banking system. AePS can be used by the following:

• Government and Regulators: AePS fulfills the government’s goal of furthering financial inclusion all over India. To initiate alternative living choices of being a Business Correspondent. Along with this, they aim to go cashless with digital transactions of retail payments and set up an acceptance framework, through BHIM Aadhaar Pay.
• Banks: AePS enables trouble-free interoperability between banks with an easy and time-effective KYC process. It saves money and helps the bank to address the customers in remote areas where the bank branches are not present.
• Individuals: AePS has brought banking to every individual’s doorstep and made it easier for them to do all the banking activities without visiting the branch, worrying about carrying cards or keeping in mind the pins and passwords. These services are included for banking customers.
• Merchants: AePS allows traders to require digital payments inclusively and beneficially.

The AePS model is created to smoothly handle both intra and inter-bank transactions by enabling a verification gateway for all Aadhaar-linked account holders.

The following are some examples the banking customers can utilize the AePS service in:

1. Access to distant banking services: For example, Lata stays in a remote village and needs to travel for around 3 hours to reach the nearest bank branch. She regularly needs to visit a physical bank branch to withdraw cash for her needs. At times, she is not able to visit the local bank for her banking needs. AePs services have made it easy for people like Lata to do their basic banking tasks by introducing the authorized Business Correspondent in remote areas by just using their Aadhaar details.
2. Transactions in remote locations: Migrant worker Rakesh has a stable job in the metropolitan city and needs to send money to his parents in his village. He transfers the money by just providing his Aadhaar number, virtual ID, transaction type, amount and biometric details and his father’s Aadhaar card number.
3. Balance inquiry: Kasturba runs a small handicraft business, she supports other small businesses and buys raw materials from them. She makes various transactions in different accounts. She regularly travels from remote areas in search of small businesses for raw materials and has no access to her home bank branch account, she uses the Aadhaar-enabled service most of the time to check her account balance to keep a track of her expenditure as she moves.
4. Cash withdrawal using Business Correspondent: Shreya is an intelligent law student studying far away from her hometown. She covered her educational fees through her scholarship. She needs cash for her daily expenses, rent and emergencies. Using the micro ATM, she receives cash from her parents from the Business Correspondent. Using the AePS cash withdrawal service, her account is debited for withdrawing the money.
5. Cash Deposit using Business Correspondent Micro ATM: Ramesh is an average sugarcane farmer. When he gets cash by selling his sugarcanes during the harvest season, he deposits them in his Aadhaar-enabled account by using the Business Correspondent ATM nearby and saves time traveling to the nearest bank branch that is located in another town.
6. Aadhaar to Aadhaar fund transfer: Andrew works as a manager at a garage in a small city away from his parents. From time to time he sends them money. He uses a Business Correspondent operated micro ATM near his garage to his parents’ Aadhaar enabled account in his hometown to make transactions.
7. Mini Statements: Hemant owns a small diary in Gujarat. He doesn’t own a smartphone to check the transactions made by the buyers. Rather than visiting his nearest bank branch to check his banking statements he simply uses the closest Business Correspondent to check his transactions by just using a mini statement request.
8. Digital merchant payments with BHIM Aadhaar Pay: Shopkeepers appreciate BHIM Aadhaar Pay as it makes it easy for them to receive payments from buyers without worrying about the change. Atif runs a small Kirana shop and uses the features of BHIM Aadhaar Pay. It is convenient for him to receive cash from his customers without keeping a bundle of cash in the shop. The customers are happy because it is quick and safe.
9. Self Help Group (SHG): Many women lead small businesses in villages. A woman named Ashabai leads a seasoning packing self-help group of 15 women members. The SHG often needs to carry out transactions to pay vendors, get raw materials, share profits and from time to time monitor the payments from clients and check the bank statements and balance. AePS offers authentication services which makes it easy for Ashabai and her members to carry out smooth transactions from their village itself. It’s time-saving and cost-effective which helps them to grow their businesses.

Reasons to Use AePS

AePS simply requires a bank holder to provide their Aadhaar number and biometric information to initiate a transaction. It also allows the merchants to facilitate transactions through Aadhaar-based biometric verification and to accept the Aadhaar number, Virtual ID and biometrics of the consumer for the purchase of goods and services.

Key reasons why AePS must be opted included:

• Ease of use.
• Safe and secure payment system.
• Interoperability across various banks.

Steps to use AePS:

• Go to any banking correspondent or a micro ATM.
• Give your bank details and Aadhaar number.
• Select the type of transaction you are willing to make.
• Provide verification through biometrics.
• Collect your transaction receipt.

Bottom Line

The Aadhaar authentication just has a few requirements to utilize the AePS services. Biometric matching includes IRIS, fingerprint and face authentication. Demographic matching and along with a one-time password feature. The way to make the AePS services work smoothly and effectively is to link your Aadhaar card to your bank account and you’re good to go.

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Nikita is a Staff Writer for Forbes Advisor. Her career spans writing on personal finance with expertise in the cryptocurrency market. She’s fond of venturing into the unknown and counts finance, entertainment, and fashion as her top interest areas.

Aashika is the India Editor for Forbes Advisor. Her 15-year business and finance journalism stint has led her to report, write, edit and lead teams covering public investing, private investing and personal investing both in India and overseas. She has previously worked at CNBC-TV18, Thomson Reuters, The Economic Times and Entrepreneur.