Several cases of fraud involving AePS where people have been defrauded after using Aadhaar data during the registration of properties have emerged. 
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Several cases of fraud involving AePS where people have been defrauded after using Aadhaar data during the registration of properties have emerged. The Reserve Bank of India on Thursday proposed that onboarding of Aadhaar-enabled Payment System (AePS) service providers will be streamlined and additional fraud prevention measures be introduced.
"We propose to streamline the process of on-boarding of Aadhaar Enabled Payment System (AePS) service providers and introduce additional fraud risk management measures," RBI Governor Shaktikanta Das said.
Aadhaar-enabled Payment Services (AePS) is a bank-led model that allows online financial transactions at Point-of-Sale (PoS) and Micro ATMs through the business correspondent of any bank using Aadhaar authentication. It removes the need for OTPs, bank account details, and other financial details.
“Though RBI has not prescribed any particular AFA, the payments ecosystem has largely adopted SMS-based One Time Password (OTP). With innovations in technology, alternative authentication mechanisms have emerged in recent years. To facilitate the use of such mechanisms for digital security, it is proposed to adopt a principle-based Framework for authentication of digital payment transactions”. Instructions in this regard will be issued separately,” the RBI Governor said on Thursday.
Aadhaar Enabled Payment System (AePS), operated by NPCI, enables customers to perform digital payment transactions in assisted mode. In 2023, more than 37 crore users undertook AePS transactions, which points to the important role played by AePS in financial inclusion.
In December 2023, the National Payments Corporation of India (NPCI) took steps to prevent scammers from misusing customers’ credentials to empty their bank accounts. The payments body asked acquirer banks’ to allow interoperable AePS (Aadhaar-enabled Payment System) cash withdrawal transactions only after Aadhaar-based biometric authentication of business correspondents (BCs) and agents.
Besides, NPCI said acquirer banks, which provide the necessary infrastructure to the merchant to accept payments and facilitate acceptance of payments through cards, should ensure that there is no misuse of the BHIM Aadhaar Pay transactions for carrying out cash withdrawals and to have daily monitoring to identify and stop any misuse.
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