AePS: Building the Stepping Stone for India’s Economy


“It’s not the strongest or most intelligent who will survive but those who can best manage change”- Charles Darwin.

Welcome to the year 2020, a year which was envisioned with technology ruling over the world with flying cars and our daily functioning, with our biometrics. The latter certainly is proving to be true as India, a country with a population of 1.3 billion has managed to gather 1.19 billion enrollments for Aadhar cards. This makes Aadhar the world’s biggest biometric database, offering the potential to revolutionize the financial system in India.

Aadhaar Enabled Payment System or better known as AEPS, is a system with the help of which you can perform many basic banking transactions like making several payments, interbank or Intrabank money transfer, making withdrawals, depositing cash, enquiring about your bank balance, etc. It enables the payments of the consumers, using their Aadhaar and by providing Aadhaar authentication at the point of sales or micro ATMs. It is a simple, safe, and user-friendly platform for financial transactions. AEPS was formed to accelerate the financial inclusivity in India.

Financial inclusion is a major step towards the holistic development of a country. It refers to those efforts that make financial products and services accessible and affordable to all individuals and businesses, regardless of their personal net worth or company size. In India, only 38% of the 1,17,200 scheduled commercial banks operate in rural areas. AEPS is a tool that helps bridge the gap by facilitating the rural population with services that are offered by banks.

AEPS is a bank-controlled model that allows online interoperable financial inclusion transactions at Point of Sale-PoS or Micro ATM through the bank’s Business correspondent. mBnk works to onboard as many retailers throughout the country so that it can maximize the PoS and number of mATMs. It envisions providing banking facilities to the rural and semi-urban demography. There are six types of basic financial transactions which are: the facility of cash deposit, cash withdrawal, easy balance inquiry, intra-bank or interbank fund transfer, hassle-free purchasing at fair shops, and obtaining a mini statement. To use this form of payment the consumer does not need any document or card however there is a prerequisite of the Aadhaar being linked to the account.

In 2020, a rampant virus is spreading rapidly causing the Indian government to go on the backfoot and initiate multiple phases of precautionary lockdowns. This has caused bank visits and usage of ATMs to be hampered. However, the average daily transactions through the Aadhaar-enabled payment system (AePS) has doubled to Rs 113 crore on account of various direct benefit transfer schemes announced by the government during the coronavirus -induced lockdown. The finance ministry’s department of financial services (DFS) tweeted that the average daily AEPS transactions doubled to 1.13 crore in the last 40-days of lockdown. A total of 43 crore transactions worth Rs 16,101 crore were made during the lockdown period, this was in the month of May. Digital payments in India began to boom even before any of us had heard of coronavirus. Just between 2018 and 2019, our country saw a mammoth growth of 383 percent in digital payments. The government has taken the initiative and thereby decided to bring together all the unbanked segments of the society under the banking umbrella.

AEPS helps cross the geographical and physical hurdles that are present. It gives the rural and semi-urban population, which constitutes over 70% of the country’s population the chance to avail of banking provisions which will then help them gain better financial security. This in turn will help accelerate the growth of the economy and help it to recuperate. Though India is in a nascent stage of the digital revolution, AEPS is that tool that forms a stepping stone to the financial revolution.