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Revolutionizing Financial Inclusion- Aadhaar enabled Payment System (AePS)

Jul 27, 2022

Over 85% of bank accounts in India are inactive.

Research shows that the inactive accounts can be attributed to the issues faced by the underserved populace across remote corners of the country.

Bringing the underbanked and unbanked population into mainstream financial services is crucial for financial inclusion, the foundation of economic growth.

Digital payment modes such as mobile wallets, UPI, contactless, payment cards, and QR codes have enabled universal access to financial services. But they still leave a gap for senior citizens, underprivileged, and inerudite sections of the society. These sections find it challenging to buy a smartphone or a payment card or even remember a passcode or PIN. Thus it becomes harder for them to join the digital Indian ecosystem.

To resolve these challenges and to enable people from all walks of life to benefit from digital financial services, Aadhaar enabled Payment System (AePS) was brought into existence.

Before diving in to know more about AePS, let’s have a quick look at what Aadhaar is and how it helps financial inclusion.

Aadhaar, driving inclusivity, and benefits

Aadhaar is a 12-digit individual identification number issued by the UIDAI (Unique Identification Authority of India) on behalf of the Indian Government. In India, the Aadhaar number serves as a proof of identity and address. Any citizen of India is eligible to apply for Aadhaar Card. They can receive it via India Post, and as an e-Aadhaar downloaded from the UIDAI website.

Aadhaar, the world’s largest biometric ID system, has been a crucial enabler of inclusive financial services in India. It captures fingerprints, retinal scans, and facial identification as chief authentication factors for transactions. So, the bank customer need not carry a smartphone or a payment card, or remember PINs and passwords.

More than 131 crore adults registered with Aadhaar have seamless access to banking services, insurance, and direct benefit transfers from over 700 financial inclusion schemes announced by the central and state governments.

India’s financial inclusion index stands at 53.9, which is an impressive display of inclusivity brought about by Aadhaar.

Aadhaar leverages advanced technology for transparent and targeted delivery of financial services, benefits, and subsidies without the hassle of intermediaries. Aadhaar saved the Indian government ₹2.25 lakh crores in Direct Benefit Transfers (DBT) by getting rid of fake beneficiaries and routing benefits to deserving people.

What is AePS?

Aadhaar enabled Payment System (AePS) is a payment system that facilitates interoperable digital financial transactions through Aadhaar card-based verification (quick eKYC). It uses a Unique Identification Number or the Aadhaar number to make transactions effortlessly. Serving as a simple, secure, and user-friendly platform, AePS helps blue-collared workers, senior citizens, and the underprivileged to benefit from cashless transactions.

AePS is a bank-led model, and any Indian resident can utilize the service just with their Aadhaar number that is linked to their bank account — Aadhaar Enabled Bank Account (AEBA). The Aadhaar enabled Payment System allows online transactions to take place at PoS (Micro ATM)/Kiosk/mobile devices through the Business Correspondent (BC) of any bank using Aadhaar authentication.

Leveraging AePS, banks can empower all segments of society by increasing user-friendly access to cash deposits, payments, money transfers, and withdrawals. AePS use cases are accessible at any biometric-enabled touchpoint, viz., all-in-one integrated devices, mobiles/PCs/tablets, or any accessories that meet the technical specifications defined by UIDAI. By enabling AePS solutions, banks can enable seed status checks for direct benefit transfers, social security pensions and government subsidies.

What are the requirements for AePS transactions?

AePS does not need a smartphone, document, or payment card. It only requires the customer to link the Aadhaar card to the bank account to capture the following info.

  • Aadhaar Number
  • Biometrics-fingerprint identification
  • Name or Bank Issuer Identification Number (IIN)

If not, just remembering the last four digits of the Aadhaar number will do. The Business Correspondent with an AePS machine or Micro ATM on assisted mode should be able to do any transaction for the customer.

Key objectives

The main objective of AePS is to use Aadhaar number/ Virtual Identity to access AEBA for banking transactions through Business Correspondents (BC).

It also aims to:

  • Securely facilitate interoperability
  • Enable quick eKYC services
  • Electronify retail payments as per RBI regulations
  • Build a full range of Aadhaar enabled Banking Services
  • Improve financial inclusion in India (According to the goals of GoI and RBI)
  • Enable intrabank and interbank transactions through a central switching & clearing agency
  • Empower bank customers to use Aadhaar for banking transactions

In addition, AePS helps deliver Government disbursements like NREGA, social security pension, and handicapped old age pension.

AEBA services

With the help of AEBA (Aadhaar Enabled Bank Account), banks can offer the following services.

  • Cash Deposit
  • Balance Enquiry
  • Purchase
  • Cash Withdrawal
  • Mini Statement
  • Aadhaar to Aadhaar Fund Transfer
  • eKYC
  • Best Finger Detection
  • Demographic Authentication
  • Aadhaar Seeding Status
  • Self-Help Group (SHG) Transaction
  • BHIM Aadhaar Pay
  • Authentication

How can customers use AePS?

Customers can make AePS transactions in two ways.

  • Through Business Correspondents — who usually represent the banks or entities. They are equipped with Micro ATM devices for facilitating customer transactions.
  • Through BHIM Aadhaar Pay at merchant locations — where the customer can make payments just by using Aadhaar number/VID and verify their identity using biometrics.

5 steps to perform an AePS transaction

The steps below will guide customers to perform an AePS transaction easily.

  1. Visit an ATM or contact a banking representative
  2. Enter the 12-digit Aadhaar number and bank account number in the PoS machine
  3. Choose a transaction type from the list- cash deposit, mini statement, withdrawal, balance enquiry, or fund transfer
  4. Enter the transaction amount
  5. Verify identity using biometrics (iris scan, fingerprint, or face recognition)

Once all this is done properly, the transaction will be completed, and you can collect your receipt.

Why and how can banks and merchants offer AePS?

For Banks

Banks can reap the following benefits by offering AePS to their customers.

  • Reach more customers by engaging with Business Correspondent
  • Cut costs by leveraging digitization and reducing the printing of cheques and payment cards
  • Save time and money using a Business Correspondent instead of brick and mortar branches
  • Enable smooth interoperability among banks
  • Establish a quick and easy paperless KYC

When banks wish to offer AePS to their customers, they just have to apply with NPCI / UIDAI. Then, they will be permitted to deliver AePS after the vetting and application process is completed.

For Merchants

Merchants can accept AePS for cost-effective and inclusive payments. This will help them widen their customer base. Merchants can offer AePS by just applying to an authorized bank. After this, they can then receive digital payments for goods and services that are delivered from their customers.

Greater security, trust, and inclusion

When banks and merchants offer AePS, their customers can easily transact just with biometric authentication, either a face recognition, iris scan, or fingerprint identification. All these three aspects can never be forged, ensuring secure transactions.

Banks and merchants can gain more customers through AePS as transactions can happen without the need of a physical card, passbook, smartphone or any other document. This will improve customer trust and confidence to make transactions in rural areas, especially among the underbanked segments. Banks across India are attributing enhanced revenue and cost-cutting to AePS offering.

Want to add AePS to your payment ecosystem? Write to us at

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  1. Rohit Sharma

    Hello, I read your blog, found it interesting, and got to know a good deal about AEPS Services and their role in the better development of rural sectors. Recently, I also had a great interaction with one of the AEPS Services Providers. They entertained me with a walkthrough of their services and it was a great experience.

    • Suja Jude

      Hi Rohit,
      Thank you for sharing your interest.
      Glad you had a great experience in the AePS walkthrough.
      Thank you.

  2. Suja Jude

    Hi Palash,
    Thanks for sharing your interest!
    Our team will get in touch with you shortly.
    Thank you.


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