What is the Aadhaar Enabled Payment System and how does it work? Aadhaar Enabled Payment System has emerged as a much required technological facility for making financial transactions in a country that has its significant population working as migrant labourers or resides in rural areas. By facilitating traditional banking in the underserved rural areas, AePS is a fantastic project launched by the National Payments Corporation of India (NPCI). With a long-term objective to promote financial inclusiveness, AePS makes use of the Aadhaar biometric database, which keeps the distinct identifying information of Indian citizens, including fingerprints and iris scans. Anyone with a little knowledge of digital payments can use AePS to conduct banking transactions as it eliminates the requirement for debit cards and PINs.
How does AePS work? Consider a situation when there isn’t a bank branch near where you reside in a village or small town in India. To access the financial services, you may have to walk about more than five kilometers. However, a kirana (grocery) store owner nearby, just joined forces with a bank or financial service provider to serve as their Banking Correspondent (BC). This means that the Kirana store owner has become smart now as he carries a Micro-ATM and offers basic banking services through Micro-ATM.
To take out cash from your bank account, you just need to visit the nearby kirana store and using your Aadhaar number, you inform them that you would like to take money out of your account. Remember that to avail this service, your bank account
and Aadhaar needs to be connected. As a next step, the banking correspondent will ask you to touch the fingerprint scanner with your finger. To verify your identification, the Micro-ATM compares your fingerprints with the biometric information kept in the Aadhaar database. Once the authentication is done, the Micro-ATM takes the required amount of money out of your account. For the confirmation of the transaction, a printed receipt is handed over to you by the BC.
With the Aadhaar Enabled Payment System, you can do a lot, such as depositing or withdrawing cash, balance inquiry, taking mini statements, Aadhaar to Aadhaar fund transfer, BHIM Aadhaar Pay, and other financial services. To access all these services with AePS, you no longer need a physical bank branch, a debit card, or PINs and OTPs when you use AePS. At the moment, AePS transactions cost a little more than UPI transactions. Some banks apply certain restrictions on AePS transactions, such as there is a daily cap of ₹50K on the total number of transactions, and you can only send a maximum of ₹10,000 per transaction.
The role of Micro-ATMs and Banking Correspondents The banking correspondents and micro-ATMs use AePS to empower the underbanked and unbanked population. The installation of Micro-ATMs brings convenience and flexibility to the remote areas of the country, where there are few traditional bank branches. By bridging the gap and establishing a more inclusive financial ecosystem, AePS delivers these services directly to their doorstep through Micro-ATMs and BCs. AePS is bringing changes in society where cash has historically been the favoured method of payment, by promoting digital payments. Micro-ATMs help achieve the broader objective of a less-cash society by facilitating the shift to cashless economies as they proliferate. Additionally, they help the people access the benefit of government subsidies to recipients’ bank accounts.
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