The Unique Identification Authority of India (UIDAI) is working with the Reserve Bank of India and banks on incentivising the use of mobile-based Aadhar application by merchants through payment of a one per cent commission on transaction value.
Once the incentive plan is in place, the Aadhaar Enabled Payment System (AEPS), could emerge as the prime mode of e-payment in the country as all existing debit cards and e-wallets require merchants to pay a fee.
With around 380 million Aadhar-linked bank accounts, the move will also allow merchants receive payments directly from the UPI app without having to register first.
For the customer, the Aadhar card could soon become a universal payment ID with the government soon unveiling a feature for payments through the Bharat Interface for Money (BHIM) app by simply entering the 12-digit Aadhaar number.
Transactions where Aadhaar is listed as a payment ID on the BHIM app will not require any biometric authentication or prior registration with the bank or Unified Payment Interface (UPI). This will make it more mainstream since almost one-third of India already has Aadhaar numbers, which have been linked to their bank accounts.
UIDAI is currently working with banks and the National Payments Corporation of India (NPCI) and expects to roll out the feature in the "next few weeks."
Though BHIM allows sending money to a mobile number, it requires the receiver to be registered with the UPI in order to accept payment. In turn, the long process of generating a UPI PIN by entering debit card details may discourage the poor and the illiterate.
Currently, there are five payment options on the BHIM app - namely mobile number, bank account or IFSC code, among others. Aadhaar number will be the sixth such option.
Making Aadhaar a payment address is only part of the plan. It will also be possible to key in the Aadhaar number at a point-of-sale device and authenticate using biometrics.