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The future of Aadhaar Pay and Digital India push looks uncertain after SC verdict

It is no longer mandatory to link Aadhaar with bank account and mobile, and that could hurt the future of digital payments.

  • Published: September 28, 2018 10:47 AM IST
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Following recent data breach and leaks where Aadhaar database was reportedly compromised, there has been a big debate about security of personal information and biometrics. A couple of days back, the Supreme Court gave its verdict on Aadhaar controversy, and it is no longer mandatory to link your 12-digit Aadhaar number with a bank account and mobile number, or for school admission. But, with Aadhaar being a crucial factor in digital payments mode, the future of digital India push looks bleak.

After demonetization, there has been a rise in digital payments. One of the things that make digital payments a breeze is that you can send and receive money using 12-digit Aadhaar number or a UPI ID. The money sent or received will directly be debited or credited in your bank account. The service works instantly and is available 24×7, 365 days.

However, now that the supreme court has scrapped the need for linking Aadhaar with bank account, it will ultimately impact the payment mechanism. The best part of Aadhaar Pay and UPI were that it did not require the recipient’s bank account number, branch, bank name, IFSC code and more. Only an Aadhaar number was more than enough.

Speaking to ET, a senior private bank executive said “for all practical purposes, Aadhaar has become optional.” Customers can still link Aadhaar with bank account if they choose to. In 2017, PM Modi launched Aadhaar Pay, which was expected to be a key driving factor to promote digital payments outside urban cities.

“If people can link their bank accounts and mobile numbers with applications like Google Pay or WhatsApp, then why they can’t do the same in the case of Aadhaar Pay As long as there is no element of compulsion, it can be done,” a government official told ET.

PM Modi had also launched AePS (Aadhaar-enabled Payment Service), the one that would allow customers without a debit card or a smartphone to transfer or withdraw funds, check account balance, and more using biometric authentication using microATMs. With the SC verdict, the future of this unique solution also looks uncertain.

“Either way, AePS was not a very popular phenomenon in the urban areas, but it offers a particular advantage to people who may not have a card, smartphone or are not literate. So it is still available as a solution for them, otherwise some new technology will come and take its place,” the officer added.

Talking about SC Judgment, an analyst said that lawmakers and regulators need to clarify on what happens to the Aadhaar-based payment mechanisms. “In spirit, the judgement supports leveraging Aadhaar for benefits distribution,” he said.

Lastly, at the launch of BHIM Aadhaar Pay app, PM Modi had said that you don’t need a high-end phone to use this unique payment solution. Even a Rs 1,500 phone will be capable of making digital payments, and sure enough, the JioPhone has NFC functionality to enable tap-and-pay. The feature is mostly aimed at rural areas where people either don’t want to spend on an expensive smartphone, or are happy with a feature phone.

According to the numbers shared by ET, there are 970 million bank accounts, around 610 million have already linked Aadhaar, and there are over 800 million mobile phone subscribers in India. Now it remains to be seen how the SC verdict affects the future of digital payments in the long run.

  • Published Date: September 28, 2018 10:47 AM IST