March 14, 2017 -
IDFC Bank Ltd. has launched the very first Aadhaar Pay merchant platform and mobile application for Google smartphones.
IDFC Bank is an Indian banking company with headquarters in Mumbai that forms part of IDFC, an integrated infrastructure finance company.
The digital payment platform allows customers to make retail purchases without having to use plastic cards or mobile phones. Any Indian merchant that utilizes the application can enable their customers to make payments through the provision of only their Aadhaar number and the identification of their banking institution.
Aadhaar is the 12-digit unique identification number issued by the Indian government to every individual resident of India. The Aadhaar project aims to provide a single, unique identifier which captures all the demographic and biometric details of every Indian resident. Currently, Aadhaar has issued over 900 million Aadhaar numbers. BiometricUpdate.com recently reported that over one billion people have now been enrolled in the scheme. The system also provides identification to people who do not have birth certificates.
Although the Aadhaar scheme was initially launched for the provision of social services, the Indian government’s next intention is to extend Aadhaar to the majority of consumer financial transactions. Currently there are 400 million bank accounts linked to Aadhaar. If successful, schemes such as Aadhaar Pay could help transition the country to an entirely cashless digital payment system, which will be designed to function regardless of whether consumers have Internet connectivity, are illiterate, or have a smartphone.
Analysts, including Amitabh Kant from the the National Institution for Transforming India (NITI Ayog), predict that the country might introduce biometric payments on nationwide scale within three years, thereby eliminating the need for cash and typical electronic payment methods, including: automated teller machines, along with debit and credit cards. Aadhaar Pay could be interpreted as first step towards this goal.
A practical benefit that the app provides consumers is that it eliminates the use of passcodes and passwords, and can use a biometric fingerprint scan or other biometric data to validate a transaction.
Merchants benefit from the new platform since the application does not charge fees typically applied by payment processors such as Visa and MasterCard.
Kant told Indian CEO magazine: “There are no MDR (merchant discount rate) charges” when using the IDFC Aadhaar Pay application. Both Kant and his think-tank, NITI Ayog, are influential promoters of the Indian government’s drive towards a digital, cashless economy.
The IDFC application is not available for merchants via the Android Play Store. Instead, merchants must sign up for the Aadhaar Pay program, and then they receive an application download link through an SMS text. The platform works by linking an Android smartphone to a biometric scanner, which functions to authenticate consumer transactions.
The Unique Identification Authority of India (UIDAI), which administers the Aadhaar scheme, claims the biometric nature of transaction enhances consumer safety and privacy. Ajay Pandey, Chief Executive Officer of UIDAI told Indian CEO magazine: “This system is as safe as any other system of payment. In fact, my personal opinion is that it is safer than any other mode.”
Aadhaar Pay is claimed to be one of the most secured payment methods by UIDAI because it uses the same suite of technologies utilized by both Apple Pay and Android Pay.
Many Indians however are concerned about the “privacy implications” of using Aadhaar as a payment scheme, according to the Centre for Internet and Society and recently an independent Indian MP claimed that none of the records contained within the Aadhaar database have been verified.
Due to these concerns, it is not surprising that UIDAI has been clamping down on other illegal practices surrounding its biometric database. BiometricUpdate.com reported that the agency recently terminated 24 fraudulent apps and Web sites which claimed to offer Aadhaar services.
Pressures to allow low-income people greater access to the banking system however will continue the drive towards a cashless economy in India. Currently, consumers can make purchases of up to Rs 10,000, or approximately US$150, on IDFC’s Aadhaar Pay enabled payment platform system. The platform is not designed to transfer funds.