AADHAAR ENABLED PAYMENT SYSTEM (AePS)

1. Context

2. What is Aadhaar enabled Payment System (AePS)?

• The Aadhaar-enabled Payment System (AePS) is a bank-led model which allows online financial transactions at Pointofsale (PoS) devices and micro ATMs of any bank using Aadhaar authentication.
• The model removes the need for OTPs, bank accounts, and other financial details.
• It allows fund transfers using only the bank name, Aadhaar number, and fingerprint captured during Aadhaar enrolment, according to the National Payments Corporation of India (NPCI).
• This method offers an additional degree of protection for financial transactions by eliminating the need to provide bank account information while conducting these transactions.
• The Reserve Bank of India (RBI) and the Indian Bank's Association (IBA) collaborated to form the National Payments Corporation of India (NPCI) (IBA).

3. Are AePS enabled by default?

• Neither the Unique Identification Authority of India (UIDAI) nor NPCI mentions clearly whether AePS is enabled by default. Cashless India, a website managed and run by MeitY, says the service does not require any activation, with the only requirement being that the user's bank account should be linked with their Aadhaar number.
• Users who wish to receive any benefit or subsidy under schemes notified under section 7 of the Aadhaar Act, have to mandatorily submit their Aadhaar number to the banking service provider, according to UIDAI. Aadhaar is also the preferred method of KYC for banking institutions, thus enabling AePS by default for most bank account holders.

4. Advantages associated with AePS

• Bank Decongestion: It, like other micro-ATM systems, has aided in the decongestion of banks. It's especially beneficial for migratory employees who don't have access to an ATM.
• Increasing Social Security Benefits: Following the expansion of cash transfer programs from governments to disadvantaged individuals, will aid in the development of social services.
• Last-Mile Service Enablement: It will make payments easier because they would be made at the doorstep rather than having to go vast distances.
• The consumer is not bound to one bank's B.C. because of the interoperable system.
• Getting rid of the Middlemen: The exploitative middlemen who preyed on the poor and ignorant would no longer exist.

5. How is biometric information leaked?

• While Aadhaar data breaches have been reported in 2018, 2019, and 2022 the UIDAI has denied any breach of data.
• In response to media reports, the UADAI said that the Aadhaar data, including biometric information, is fully safe and secure.
• However, UIDAI's database is not the only source from where data can be leaked. Aadhaar numbers are readily available in the form of photocopies, and soft copies, and criminals are using Aadhaarenabled payment systems to breach user information.
• Scammers have, in the past, made use of silicone to trick devices into initiating transactions.

6. How do you secure your Aadhaar biometric information?

• The UIDAI is proposing an amendment to the Aadhaar (Sharing of Information) Regulations, 2016, which will require entities in possession of an Aadhaar number to not share details unless the Aadhaar numbers have been redacted or blacked out through appropriate means both in print and electronic form.
• The UIDAI has also implemented a new two-factor authentication mechanism that uses a machine learning-based security system, combining finger minutiae and finger image capture to check the 'liveness' of a fingerprint.
• Additionally, users are also advised to ensure that they lock their Aadhaar information by visiting the UIDAI website or using the mobile app.
• This will ensure that their biometric information, even if compromised, can not be used to initiate financial transactions.
• It can be unlocked when the need for biometric authentication arises, such as for property registration and passport renewals, after which it can again be locked.

7. What can be done in case of a financial scam using Aadhaar?

• If users have not already locked their Aadhaar biometric information, they should do so immediately in case of any suspicious activity in their bank accounts.
• Users are also advised to inform their banks and the concerned authorities as soon as possible.
• Timely reporting can ensure that any money transferred using fraudulent means is returned to the victim.
• The RBI in a circular has stated that a customer's entitlement to zero liability arises when an unauthorized transaction occurs, and the customer notifies the bank within three working days of receiving a communication from the bank regarding such an unauthorized transaction.

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