Micro-ATM goes cashfree PDF Print E-mail
Monday, 26 December 2016 00:57
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New Aadhaar app for those without phones


Not surprisingly, in a country with very poor infrastructure, there are several well-known hurdles to increasing the pace of digital payments at the pace the demonetization exercise demands. There is the woefully inadequate number of Point of Sale (PoS) devices required to swipe your debit and credit cards – as compared to the 3 crore such devices India needs based on, say, Brazil’s PoS-penetration levels, India has just 15 lakh. With just 350 million internet connections, of which 162 million are broadband, the lack of internet facilities is another big problem area. And, with just 250 million smart-phones, 350 million feature phones and 36% of households with no phones, there is a natural ceiling to digital payments being made through the telephone network.


Encouragingly, a host of innovative solutions are being found to address these bottlenecks and, subject to being able to market them effectively enough – this is no small task, it has to be recognized – this will facilitate India’s move towards a less-cash society despite the poor levels of physical infrastructure. So, for instance, PayTM came out with a solution that sought to substitute PoS machines with mobile phones – the user would key in the credit/debit card number onto the merchant’s mobile and then key in a one-time-password to authenticate the transaction; the solution was soon withdrawn as it was felt it wasn’t secure enough, but it is likely a more viable solution will be found soon to find an alternative to physical PoS machines. While the USSD solution on offer for mobile payments using feature phones is quite cumbersome, the National Payments Corporation of India (NPCI) is working on an easier solution to allow the 350 million feature-phone owners easier access to mobile phone payments.


That leaves the 36% households without access to phones. Along with NPCI, the UIDAI is in the process of extending its Aadhaar-Enabled Payment System to the digital payments system. Right now, a low-priced biometric scanner is attached to a mobile phone and is used to authenticate a person’s identity against the Aadhaar database. This is widely used in ration shops in states like Andhra Pradesh and, when the Aadhaar is linked to a bank account, such micro-ATMs are used to disburse cash as well – in a village, typically, a kirana shop can be the centre for the micro-ATM and the shopkeeper can, after the authentication is done, hand out cash to individuals. What UIDAI and NPC have done is to extend this to digital payments – a buyer can, on a merchant’s mobile phone, just key in her Aadhaar number and bank name (not the account number), authenticate the ID through a fingerprint and the payment gets made. Such single-factor authentications are allowed by RBI up to a certain cash limit and, to that extent, this is a good solution for those who want to pay digitally but have no phones. Pilot studies are being carried out right now and UIDAI is confident of rolling this out commercially over the next few weeks. Over time, the solutions will get better, but the short point is that there is a battery of innovation being done in the mobile payments space and that can only be good news for India’s journey towards a less-cash economy.



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