Why Aadhar enabled Payment System (AePS) will work in India?

Aadhar, the biggest biometric based system in the world has grown immensely in last few years in India, and has been debated widely for its use and misuse. Aadhar which started with authentication in India has now taken a lot into its fold like Payments, Authentication, Service delivery, paperless systems etc. It now claims to be the biggest interoperable system in the world, and is helping India Stack architecture to support its multiple layers.

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Source – India Stack

Aadhar is regulated by Targeted Delivery of Financial and Other Subsidies, Benefits and Services Act 2016, and has made Subsidies, Benefits and Services delivery to citizens almost seamless and targeted to intended beneficiaries. While few will argue, but it has immense potential and it seems that with the current trend and push in the system we are going in the right direction. Now people can open bank accounts, buy SIM cards, take LPG subsidy, do Aadhar to Aadhar transfers, Peer to Peer (P2P) transfers and a lot more which I have talked about and keep sharing in my posts.

While Aadhar has multiple benefits and use cases, let us pick up Aaadhar Enabled Payment System (AePS), and talk about it in detail.

What is AePS

AEPS is a bank led model which allows online interoperable financial transaction at PoS (MicroATM) through the Business correspondent of any bank using the Aadhaar authentication.

The five possible Aadhaar enabled transactions are:-

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There are six institutions which get involved, in processing an AePS payment and settlement;

  1. You, the bank customer
  2. Banking correspondent (BC)/Partner – The facilitator of AEPS
  3. The bank of BC/Partner– The bank to which banking correspondent is attached
  4. Your Bank – the bank with which you have the bank account
  5. NPCI – For switching, clearing and settlement of transactions
  6. UIDAI – For finger-print authentication

Following diagram will explain the AePS architecture and settlement system:

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Why AePS will work in Rural India

Everybody is talking about AePS and its viability in India, it has multiple benefits like reducing burden on banks and bring efficiency and transparency in the payment system. Let me explain few of the benefits;

1. Reduces ATM cost for banks – It helps to bring down the ATM cost for the bank, because those transactions can be easily completed by a BC for customers at much lower cost than an ATM

2. Lower MDR – AePS merchant payments aim to bring down the MDR so that more people start preferring electronic payments and even merchants would embrace it without much hit on their margins

3. Quick Pay or Accept Payments – Accept and make payments with minimum input details like;

  • Aadhar Number
  • Bank IIN or Name
  • Fingerprint

4. Safety – Your bank details are safe because you do not have to share your bank account number, IFSC code and other sensitive information with the merchant

5. Serves illiterate too – The biggest advantage of the system is that it counters the issue of illiteracy in India, because illiterate people could not use the debit card and remember PIN number, but now they can transact using their Biometrics, like finger impression and may be in future with their iris.

6. Low cost of service – Cost of serving per customer has gone down, as AePS is an infrastructure-lite model and doesn’t require bulky EDC machines and hence avoiding the huge fixed cost.

7. Portable – The biometric machine is portable and can be carried easily; it can be easily plugged in any computer or a Mobile device to make payments. This will help to facilitate door step service by Business Correspondents (BCs) & other Online and Off-Line Merchants.

8. Secured Biometric devices – The biometric devices are STQC certified and must be Level 0 and 1 compliant, as per registered device regulations and all device manufacturers must adhere to it. So, the security concerns have been addressed to much extent.

9. Secured Aadhar Infrastructure – Aadhar PKI based architecture is secured, and its ever evolving security standards ensures the banking and customer data remains secured and details are safe within the system.

With the above mentioned benefits and many more, the AePS claims to be a big hit in India as part of Digital India initiative. I hope the countries who are watching India currently for this development will surely adopt this model, and we will be a proud front runner in this space.

If the above business model interests and excites you to offer AePS services to your customers, by partnering with Spice Money a part of Spice Digital Limited, you may contact us at product@spicedigital.in and we will be happy to partner with you.


BBPS (Bharat Bill Payment System) by RBI through Spice Digital (BBPOU)

With the intent to standardise and spread the power of bill payments and access to entire ecosystem, RBI conceptualized BBPS, Pay bills Any time Anywhere system, on GIRO (General Interbank Recurring Order) based payment system.

NPCI was given the onus to develop, control and operate the integrated bill payment system offering interoperable and accessible bill payment service to customers through a network of agents, enabling multiple payment modes, and to provide instant confirmation of payments.

Last year RBI gave in-Principle approval to various Bank and Non bank entities including Spice Digital Ltd (Spice Money) to operate and appoint agent institutions (AI) to run the BBPS. After reviewing the work and capabilities RBI has awarded final license to SDL’s Spice Money to work as Bharat Bill Payment Operating Unit (BBPOU) and be part of its prestigious BBPS.

To understand the importance of BBPS and role of various participants in the system it is imperative to see the flow of its payments and settlement system.

The BBPS operation model

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Figure 1 :  NPCI BBPS Presentation

Key Features of BBPS
Inter-operable BBPS will be an integrated platform connecting banks and non-banks in bills aggregation business, Billers , payment service providers and retail bill outlets
Accessible Facilitate seamless payment of bills through any channel : Digital and physical
Cost-Effective Most cost-effective for entire ecosystem
Integration BBPOUs will have to connect only to BBPCU to get access to all the billers. Utility companies just need to connect to maximum two BBPOUs to enable all customers to pay bills
Complaint Management Standardised system to handle customer grievances for both ON-US and OFF-US transactions
Dispute Management Facilitate BBPOU’s to raise and resolve disputes relating to transactions that have passed through the BBPS system
Clearing and Settlement Multiple Clearing & Guaranteed Settlements between different parties, standardised TAT
Standardisation Standardisation of processes for entire BBPS ecosystem
Brand Connect Single and trusted brand connect and BBPS Assurance

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Figure 2: BBPS Product Presentation

BBPS is a system in which only defined licensed participants can operate and transact, hence all the bill payment service providers who wants to offer and accept bills as service have to come on board after the RBI’s deadline, and only these participants will be allowed to process bill payments and settlements in the system.

Companies (Established or Start Ups) who wish to operate and offer the bill payments service to their customers will have to get in touch with licensed BBPOUs like SDL (Spice Money, which has got the RBI license to operate as BBPOU in August 2017) and become their Agent Institutions (AI) / Partner Institution. Spice Digital can extend this service to any partner institutions through API (Application Programming Interface) or through deep integration directly with their Web Portal or Mobile application for both B2B (Business to Business) or B2C (Business to Customer) interface.

This will help the partner institution to get associated with SDL, which is a valued brand in the Digital Payments space. They can earn more from their retail outlets through this service and increase their product bouquet for last mile delivery.

If you are interested to be part of the Bill Payment Platform BBPS through Spice Digital and offer bill payment service through your retail outlets write to us at product@spicedigital.in