Aadhaar payments: How the government’s new Android app works

The government has been trying to boost digital payment initiatives in the country in its effort to promote a cashless economy post the demonetisation exercise last year. And it has launched a new Android app for merchants to accept payments from customers using their biometric data or data that is encrypted under UIDAI’s Aadhaar number.

What is Aadhaar Pay?

Aadhaar Pay is a new Android application for merchants developed jointly by IDFC Bank, NPCI and UIDAI. The app, which will soon be available on Google Play Store, can be used to make transactions just with the use of biometric data stored in Aadhaar.

How does it work?

If you are a merchant, then Aadhaar Pay can be downloaded from the Play Store. Then the merchant has to install a fingerprint/biometric scanner linked to a smartphone. The smartphone needs to be connected to the merchant’s bank account and internet is required to complete the transaction.

If you are a customer, you need an Aadhaar number and it needs to be linked to your bank account. The customer’s fingerprint/biometric data is needed to complete the transaction.

The merchant must first install the Aadhaar Pay app on his smart phone and create a registered ID. Thereafter, the smart phone should be linked with the fingerprint scanner. Once the setup is complete, the customer can provide with the name of his bank, Aadhaar number and register his fingerprint on a biometric scanner to authenticate his transaction.

Are there any advantages?

Using Aadhaar Pay has many advantages. If transactions are made via Aadhaar, then no extra charges are levied unlike debit or credit cards at POS machines. While a POS machine costs more than Rs 5,000, a biometric scanner for Aadhaar Pay can be installed for Rs 2,000.

Also, transactions tend to be more secure as they require physical presence of the customer and biometric authentication. Moreover, customers don’t need to pay any annual charge for using Aadhaar Pay unlike debit or credit cards.

Is it better than e-wallets?

E-wallets need customers to carry a smartphone and needs to be recharged from bank accounts but Aadhaar Pay is directly linked to a customer’s bank account. However, e-wallets offer you cashbacks and discounts on merchandise through business tie ups, which are missing in Aadhaar Pay.

Other limitations

Aadhaar Pay works only where there is internet connectivity. While it is an effective mode of payment at merchant points, it cannot be used to transfer funds to another account. If a customer wants his money back after making payment, there’s no way to immediately understand if the money has been credited back to his bank account.