BHIM Aadhaar Pay reach in remote areas may get affected after SC verdict

The government-run Aadhaar Pay, a payment interface that allows real-time payments to merchants using Aadhaar number, faces uncertainly after the Supreme Court's Wednesday order. The Aadhaar Pay is a mandatory instrument for making and receiving payments, especially in rural areas.

After the Supreme Court's ruling that there is no need to link the 12-digit biometric number with bank accounts, banks will not only take longer processing time for opening new accounts but it will also hurt the payment mechanism in areas where banks lack reach. So far, this allowed smooth transfer of money to customers or merchants using the 12-digit biometric identification, especially areas where bank connectivity is not efficient.

Experts believe the use of Aadhaar as an identity should be made voluntary like other traditional ways of identification. They maintain that people should not have any problem with regard to the use of Aadhaar as other services like mobile number or bank account, which are linked with payment wallets such as Paytm or Google Pay, also hold information about individuals just like Aadhaar.

So anyone with a valid Aadhaar card can pay using Aadhaar number and biometrics at all merchant locations where BHIM Aadhaar Pay is accepted. The BHIM Aadhaar Pay app is available for all android smartphones, and can even work even work without smartphones or debit cards.

To remind you, the BHIM Aadhaar Pay service was launched by Prime Minister Narendra Modi in April 2017. It has two components: BHIM Aadhaar app and the Aadhaar enabled payment system, also called AePS. While people can use Aadhaar as a payment gateway for digital payments, AePS can even be used by people with no smartphone or debit card.

It allows for any merchant associated with any acquiring bank live on BHIM Aadhaar Pay to accept payment from customer of any bank by authenticating customer's biometrics. The National Payments Corporation of India data shows it registered around 104.2 million Aadhaar AePS transactions, valued at around Rs 26,286 crore, in the last financial year alone.

The Supreme Court's decision to strike down Aadhaar for private entities will also impact the new small-finance and payment banks that aggressively use Aadhaar to complete the mandatory online know-your-customer (KYC) process, a quick and cost-efficient way. All these players will now have to figure out alternate ways of on-boarding new customers.