A series of recent scams have exposed the vulnerabilities of the Aadhaar-enabled Payment System (AePS).

Important points:

  • AePS is a bank led model which allows online interoperable financial transactions at PoS (Point of Sale/Micro ATM) through the Business Correspondent (BC)/Bank Mitra of any bank using the Aadhaar authentication.
  • This system adds another layer of security to financial transactions as bank details would no longer be required to be furnished while carrying out these transactions.
  • It was taken up by the National Payments Corporation of India (NPCI)- a joint initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA).


  • Like other micro-ATM systems, it has helped to decongest banks. It can be particularly useful to migrant workers who have no ATM facility.
  • It will help in deepening social services after the proliferation of cash transfer schemes from governments to vulnerable citizens.
  • It will ease the payments which will be done at the doorstep instead of travelling long distances.
  • Interoperable system ensures that the customer is not tied to one bank’s BC.
  • Removing Middlemen: The middlemen who exploited the poor and illiterate would now be eliminated.

Existing Loopholes:

  • Sometimes BC, leveraging the financial illiteracy of people, provides less money to the consumer but enters more money to be credited into the BC’s account.
  • Manytimes, BCs deny receipts to poor people, if they demand one at all.
  • A corrupt BC can even get away with asking a gullible customer to put her finger in the PoS machine under some pretext, without giving her any money.
  • AePS has no record of the fraudulent BC, it only shows the transaction records.
  • This makes poor people more vulnerable, who already are facing scarcity of funds.
  • Failure in transactions owing to biometric mismatches, poor connectivity or weaker systems of certain banking partners, also affect the AePS.

Way Forward

  1. Providing financial literacy will help in reduction of cases of fraudulent BC.
  2. Roaming BCs should perhaps be banned, at least in states with low literacy levels.
  3. Better grievance redressal facilities must be made available to the victims of AePS fraud.


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