The Indian government is leaving no stone unturned in promoting digitization of financial transactions and now it has decided to come up with an ‘Aadhaar Payment App’, which will not only make digital payments easier but also decrease the need for plastic cards and POS machines.
This app will be launched on Dec 25 and it will remove the biggest hurdle of digital payments. Whenever a person uses a card to make a payment, the vendor needs to pay a charge to the service provider which in turn is paid by the consumer to the vendor but with this app, no fees payment will be needed; so even the merchants of small villages will also be able to use this app and that too, with their smartphones.
For using the app, the merchant will be required to download it and connect their smartphones to a biometric reader; presently the biometric reader is available at Rs. 2,000.
The consumer will be needed to enter his Aadhaar number, select the bank through which he/she wants to make payment and password will be the biometric scan for the transaction.
Ajay Bhushan Pandey, CEO of Unique Identification Authority of India (UIDAI) said this while talking to ET,
“This app can be used by a person to make payments without any phone. Almost 40 crore Aadhaar numbers already stand linked to bank accounts – that is half the adults in India. The aim is to link all Aadhaar numbers with bank accounts by March, 2017.”
This app has been developed by UIDAI, National Payments Corporation of India and IDFC Bank and Sunday is the day chosen for its launch at national level. Finance Minister Arun Jaitley and Technology Minister Ravi Shankar Prasad have already seen the working of new technology on Dec 19.
In the words of MD and CEO of IDFC Bank, Rajiv Mall,
“The settlement is done through the Aadhaar bridge, which means it connects a much wider set of people. Anybody who has Aadhaar seeding done can make payments to merchants with this app. It wouldn’t matter if the person does not have a credit or debit card, or even a mobile phone.”
The government cannot rely on POS machines for making digitization successful as only 15 lakhs terminals have been installed by banks. The maximum number of terminals, 3 lakhs, has been deployed by SBI.
The card payment method is still not popular among the Indian markets despite the fact that it entered the market almost 20 years back. The reason behind this lack of interest is the 2% surcharge that is being levied by the card companies which is transferred to the consumer by the merchant.
The problem of connectivity is also a factor in discouraging the merchants to use card payment method. For a population of 125 crore and 5 crore merchants, there are only 15 lakh such machines but digitization will be a success if 1.5 lakh branches of various banks can add even 20-25 merchants in their location.
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