With Aadhaar linking is no longer mandatory, the convenience of this identity-based payment system could mean that it will also now be voluntary.

Post SC judgement on Aadhaar future of Aadhaar Pay hangs in the balance
Atom Aadhaar Friday, September 28, 2018 - 15:09

The decision by the Supreme Court of India in the Aadhaar case seems to have created more confusion and problems than it has solved. While the judgement has said that Aadhaar need not be insisted upon for availing banking services, sections of the population already enjoying certain facilities, particularly through the Aadhaar Pay mechanism and those administering it are now a confused lot, reports Economic Times.

They may have to wait till the Executive branch of the Government comes out with its own interpretation of the Judiciary’s pronouncements and how it will exactly pan out on the ground.

Of specific significance is use of Aadhaar Pay in the rural segments of the country. Since most of them had opened their bank accounts using their Aadhaar cards and the government was directly making transfers of subsidies (DBT) to their accounts, it was easy for them to make payments using the BHIM app. The fact that in the rural areas your bank branch or ATM may not be very close and one has to travel some distance made this arrangement quite convenient.

Now these people are not sure what changes could come about following the scrapping of Aadhaar for linking bank accounts. Of course, one must hasten to add that the SC has categorically approved the use of Aadhaar for DBT, especially for the poor and marginalized sections of the society. At the heart of this rural payments ecosystem is the Aadhaar enabled Payment System or AePS. The sheer numbers present a case for the system to be continued: 104.2 million AePS transactions for a total value of Rs 26,286 crore in the last financial year ending March 2018, is quite impressive.

The real question would be if Aadhaar is going to be necessary to open the accounts for those availing the benefits from the government, how do they end up using that money to make payments with their existing tools like a phone and the biometric ID which they have been doing so far?

Some private bankers like Yes Bank, IndusInd Bank and RBL Bank are reported to be leveraging this facility by offering doorstep services under the Aadhaar Pay & AePS arrangement. Their calculation is that without spending money on setting up branches and creating the infrastructure and incurring fixed costs, they are able to bring in millions of customers into the banking fold and they would also be awaiting the clarity being issued by the government.

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