Can the humble Aadhaar Pay slay digital wallets?
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More than two months after it demonetised Rs 500 and Rs 1,000 notes, the government is now reportedly pushing to make Aadhaar-enabled payments the norm across the country. 

Several reports say the government is looking to popularise Aadhaar Pay, a payments app for the Aadhaar Enabled Payments System (AEPS), which will allow merchants to accept cashless payments using just the customer’s Aadhaar number and thumb impression. 

VCCircle brings you the lowdown on Aadhar Pay and whether it could emerge as a serious challenger to e-wallets.   

What really is Aadhaar Pay?

An app that merchants can use to accept Aadhaar-based payments. It is currently not available on Google Play or App Store, but will soon be.  

Will merchants require any other device for this? 

Yes, a simple biometric device that will be attached to their smartphones (a prerequisite for downloading the app). The biometric device costs about Rs 2,000 right now, but the government hopes that with a surge in orders, costs will come down, just as happened with LED bulbs.

So how does it work?

Most bank accounts are now linked to an Aadhaar number. The merchant asks for the customer's Aadhaar number and enters it in the Aadhaar Pay app. The customer then selects the bank account from which they want to make the payment, and then authenticates the payment with their thumb/finger on the biometric device. This not only makes the transaction cashless, but also does away with the need to use credit/debit cards or remember complicated passwords.

Could Aadhaar Pay hurt mobile wallets like Paytm, MobiKwik and FreeCharge? 

Mobile wallets typically require users to load money using their debit/credit cards/net banking, and then make payments. This involves multiple stages of authentication, making the process complicated for the average user. With Aadhar Pay, however, all you need to make a payment is your Aadhaar number and sufficient money in your bank account. You do not need a smartphone or even a mobile phone. Moreover, Aadhaar Pay uses the Unified Payments Interface (UPI), which allows for direct bank-to-bank transfers and does away with the need to transfer money to a third party’s account. Moreover, transactions over Aadhaar Pay will not incur any charges for the consumer or the merchant, unlike withdrawals from wallets.

However, the requirement of a biometric device costing Rs 2,000 could deter many merchants, especially small mom-and-pop stores, from going in for Aadhaar Pay. 

Didn't the government recently launch the BHIM app? How is it different from Aadhaar Pay?

Bharat Interface for Money, or BHIM, is an app primarily for the consumer. BHIM, which also works on the UPI platform, has been a hit ever since it was launched in late December last year, already becoming the top free Indian app on the Google Play. Having said that, reports say that few merchants currently use BHIM. This means that it is primarily being used as a peer-to-peer money transfer application. 

Could the government do something to incentivise digital payments and disincentivise the use of cash?

Yes, reports say the upcoming budget could see finance minister Arun Jaitley roll out various sops for cashless payments. Service charges could be waived off and merchants going cashless could get some tax breaks. Further, the government could also set thresholds over which cash withdrawals or payments could attract charges. But all this is still in the realm of speculation. 

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