Aadhaar Enabled Payment System (AEPS): Banking Made Easy

Last Updated on December 6, 2021

Aadhaar Enabled Payment System (AEPS):

When we talk about payment methods, the first choice that comes to our minds is UPI. It is because UPI is economical in terms of time and cost. That is why it is the most secure method at the moment. But if a person gets to know your UPI PIN, he can make transactions on your behalf. What if only we could transact from our account. Well, it has been made possible. Thanks to Aadhaar Enabled Payment System (AEPS).

It uses our fingerprints to validate a transaction. So, only you can initiate a transaction. Sounds exciting, right? Want to know more about it? Let’s start. 

Table of Contents

What is Aadhaar Enabled Payment System (AEPS)?

As the name suggests, Aadhaar Enabled Payment System (AEPS) is a system that allows the customer to pay using his unique identification number, i.e., the Aadhaar Number.

Yes, you read it right. You don’t require anything to do a transaction, be it a mobile application, internet connection, or the hassle of visiting a bank. You only need your fingerprints that all of us carry everywhere with us. Here, you can make deposits, withdraw cash, initiate payments, and whatnot! It makes banking available at our fingertips (literally ;).

And the developer of this innovative invention is no other than NPCI. The same entity that introduced us to the breathtaking payment method known as UPI.

How to Use AEPS?

The next big question is: How can I avail this facility. Well, the process is easy-peasy. Before doing transactions through AEPS, link your Aadhaar number to your bank account. After all, how can you expect to make transactions via Aadhaar when the bank doesn’t even know it in the first place?

Here is the complete process to make a transaction via AEPS:

  1. Selecting the place of transactions

You can make the transactions via a micro ATM (like a point-of-sale terminal) or a banking correspondent. You can choose any location. But you have to select a specific banking correspondent if you wish to transfer funds.

2. Providing the relevant details

Here, you have to provide your Aadhaar and bank account number. You don’t need to provide any other information. The data is more than enough to carry out a transaction.

3. Choosing the type of transaction

As you do in an ATM, select the type of transaction you wish to initiate.

4. Verification

The next step is to verify the transaction. And you can do it through the fingerprint or iris scan. You may think that anyone can transact on your behalf if they have the relevant details. But try to have faith in the government. When they could manage such a vast country, what’s the big deal in making this payment method secure.

5. Receipt

It is our fundamental right to ask for proof post-completion of the transaction. And this case is no different. After the transaction gets completed, remember to collect your receipt. Or, you won’t have any legal rights if your hard-earned money gets lost. 

Benefits of Aadhaar Enabled Payment System

It is different from other payment methods. The best benefit is that you don’t have to remember any password. So, your forgetfulness won’t affect you, at least while banking. Besides this, it also offers the following benefits:

Easy to Use

It is easy to use, considering the present infrastructure. So, you don’t need to have a third-party mobile application. There is even no need for an internet connection. So, lack of internet connectivity doesn’t become a hurdle while making transactions.

Safe and Secure Payment Method

The transaction gets verified with the help of biometric identification and eyelid scan. They are unique for everyone. So, others can’t make transactions on your behalf unless he is a hi-tech hacker.

Compatible across various banks

Almost all national banks have this facility. That is why your data get stored on a real-time basis. So, you can get the updated information at all times.

Banking services for the underbanked

The primary objective of implementing AEPS was to make banking facilities available to the semi-urban and rural areas. There are many payment methods for urban areas. But that is not the case with rural areas due to lack of internet connectivity. AEPS takes care of it as well, so that the underbanked people can also avail banking facilities.

Disbursements of government schemes

AEPS is a secure and authentic method. And it is regulated by the central government. So, they can disburse the payments without compromising the safety of the benefits.

Things You Can Do with AEPS

AEPS is a relatively recent innovation. So, it will take a while to utilize its full potential. That is why it doesn’t support hi-tech transactions yet. But it can do all the activities an average person expects from a bank. It includes:

  • Cash deposit and cash withdrawal facilities
  • Balance inquiry and account statements
  • Intra-Bank and inter-bank fund transfers
  • Payment transactions: Consumer to Business and Consumer to Government
  • E-KYC services

As it got introduced for the unbanked people, it is a one-stop solution for them.

Final Words

AEPS is a much-needed innovation to increase the reach of banking facilities. In short, it is like a micro bank. Due to its unique identity verification, it is considered more secure than other payment methods.

That is why 118 banks have already adopted this facility. As the main focus is on backward people, the charges are as low as possible. Even there is no prescribed transaction limit as per NPCI. So, banks have the liberty to set it themselves.

In the end, it has many competitive advantages. So, make sure to utilize it to the maximum.  It will benefit both the customers and the government.

Frequently Asked Questions

Q1: How do I start an AEPS service?

If you haven’t linked your bank account with Aadhaar, you can’t avail this facility. After you link your Aadhaar number, contact the bank and tell them to provide an AEPS facility.

Q2: Should the beneficiary have the AEPS facility as well?

Only the transferor should have an AEPS facility. The beneficiary doesn’t need to have that facility.

Q3: Is it possible to link more than one bank account to the Aadhar Number?

Yes, you can link more than one bank account to your Aadhar Number. But you can avail of the AEPS facility only from one account in a particular bank.

Q4: What is IIN?

Issuer Identification Number (IIN) is a 6-digit number allocated to the bank issuing the AEPS terminals. It helps in identifying the bank effortlessly.

Q5: What are the charges for AEPS transactions?

The charges levied by UIDAI are nominal. Even NPCI charges only 15 paise per transaction. The issuing bank may charge as per their choice. Generally, the bank charges vary between Rs 5 and 15.

Q6: Is AEPS safe?

As the method involves using biometric information, it is next to impossible for anyone other than the account holder to transact. So, you can consider it as safe as Dettol.

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About the Author: Prasuk Jain

I am an inquisitive and tenacious person with a mix of enthusiasm and a positive attitude, currently pursuing CA.