Aadhar Payment bridge system
- Aadhar Payment Bridge System is used by the Government Departments and Agencies for the transfer of benefits and subsidies under Direct Benefit Transfer (DBT) scheme launched by Government of India.
- It is a unique payment system implemented by National Payments Corporation of India (NPCI).
- It uses Aadhaar numbers issued by UIDAI & IIN (Institution Identification Number) issued by NPCI.
- The basic idea of the APBS is that a person’s Aadhaar number becomes his/her financial address. Instead of having to provide multiple account details (say, her name, bank account number and IFSC code) to receive a bank transfer, one only has to provide Aadhaar number.
How it works
Induction of a bank account into APBS involves two distinct steps, both of which are meant to be based on informed consent
- First, the account must be “seeded” with the customer’s Aadhaar number. When a customer seeds their Aadhaar number to a bank account, an update to the customer information on bank’s Core Banking System (CBS) is made. There should be explicit consent for the customer in writing as per the prescribed proforma for seeding Aadhaar number
- Second, it must be connected to the NPCI mapper — a step known as “mapping”. Mapping is a process of associating a Bank with Aadhaar number which is facilitated by NPCI for Direct Benefit Transfer to the respective Bank. Institution Identification Number (IIN) is issued by NPCI to every APB System participating bank and is used to uniquely identify a bank to which the APB transaction has to be routed in the Aadhaar Payment Bridge (APB) System. It is a unique 6-digit number. In cases of multiple accounts for the same person, the APBS automatically sends money to the latest-mapped account.
Other payment system
There are broadly 3 payment systems / integrations built around Aadhaar and run by the NPCI
- Aadhaar Enabled Payment System (AEPS): AEPS is the platform in which a person can do basic banking transactions including withdrawal, deposit cash, fund transfer etc. from his /her bank account at Micro-ATMs using biometric authentication. Bank is chosen by resident as it is a resident present transaction.
- Aadhaar Pay/ BHIM Aadhaar: Aadhaar Pay is merchant version of AEPS. The Application works on a low-cost android phone with single finger bio-metric device. It enables merchant to take cashless payment from his customers. Bank is chosen by resident as it is a resident present transaction.
- Aadhaar based Remittance Service (ABRS) — Enables funds transfer through a person’s Aadhaar number. In ABRS, a remitter can initiate IMPS transaction using the beneficiary’s Aadhaar number, which acts as a financial address & which will be linked to the beneficiary’s account number.
Benefits of APBS
- APBS has led to electronification of a large number of retail payment transactions which were predominantly either in cash or cheque.
- Eliminates inordinate delays, multiple channels & paper-work involved in the existing system.
- In case of change in bank account, customer is not required to convey the bank account details or change in bank details to the Government Department or Agency.
- Customer not required to open multiple bank accounts for receiving benefits and subsidies of various social welfare schemes – Customer just need to open one account and seed his/her Aadhaar number in the bank account to start receiving benefits and subsidies directly into his/her Aadhaar Enabled Bank Account.
- It helps the government to serve the goal of financial inclusion and reframe subsidy management program.
Issues with APBS
- Unreliable seeding of Aadhar with bank account- It is alleged that when Jan Dhan Yojna was launched, seeding of Aadhar was done without due verification
- Inconsistencies between Aadhar database and bank database – Due to haphazard seeding, there is inconsistencies between Aadhar database and bank database which led to discontinuation of benefits and subsidies for a large number of poor beneficiaries.
- Uninformed consent – It is alleged that bank accounts have been mass-mapped onto the APBS without following due process of consent.
- Issue with Mapping of account – It is found that benefits are transferred to beneficiary rarely used account. Last year, Airtel allegedly opened its customer account to airtel payment bank without following due consent and verification norms and mapped this accounts to which subsidy payments would be directed.
- Diverted Payment – it is often found that benefits are transferred to others account under APB system.
|A recent study of the Indian School of Business (ISB), based on an analysis of more than 10 million payments in 2014-18, concludes that 38% of all the APBS payments of MGNREGA wages in Jharkhand “redirect wages to a completely unrelated account”.|
- Lack of accountability – The ABPS is a very opaque payment system and few people have a clear understanding of it. When people have problems of diverted or rejected payments, there is no proper mechanism to resolve the issue. There is no agency who is responsible for enforcing the consent norms and other “guidelines” issued by the NPCI.
Although there are some initial glitches in implementation of Aadhar enabled Payment system, but Aadhaar based payment solutions are inherently easy-to-use and are built in such a way that it reduces the banking costs of providing financial services. Through the various payment solutions, Aadhaar has the power to transform the way we transact. Government must do independent and participatory review of the system and fix the loopholes.