The government’s Bhim-AadhaAr initiative, rolled out on April 14, is off to a slow start with very few transactions taking place. The initiative was aimed at encouraging merchants to accept digital payments using customers’ biometric authentification or Aadhaar. However, sources told FE merchants are still waiting for the Unique Identification Authority of India (UIDAI) to specify the exact features which the biometric authentication devices need to have.
While the government had put out a number of seven lakh merchants as having been acquired across 27 banks, there have been no further updates on either merchant acquisition or transaction volumes.
“The smartphone app that merchants need to download is ready. But they are waiting for the specifications of the plug-in device that will enable the payments before they can start,” an executive with a public-sector bank said.
The government is understood to have laid down targets for cashless transactions though this could not be immediately confirmed. Sources said, by end September, banks are to acquire 30 merchants per branch, who transact digitally, irrespective of the size of the bank or branch.
Traction at even the country’s largest lender, State Bank of India, is believed to be limited, with fewer than one lakh merchants on-boarded for Aadhaar-based payments. Moreover, the number of daily transactions ranges between 10,000 and 20,000, sources said.
The cost of the authentication device—between Rs 2,000 and Rs 3,000—may be deterring small merchants from getting on to the Aadhaar-based payments network.
Besides, the most inexpensive smartphone is priced at around Rs 4,000. This puts the cost of installation at par with that of a point-of-sale (PoS) terminal, which costs anywhere between Rs 6,000 and Rs 9,000.
“AadhaarPay is mainly for rural merchants and they are currently not on the payment system,” another banking executive told FE.
Dilip Asbe, COO, at National Payments Corporation of India, said the merchant discount rate (MDR) for Aadhaar-based transactions may be reimbursed by the government. “There is some discussion that the MDR, for Aadhar Payments, would be reimbursed by the government for a certain period of time since this is essentially for assisted mode and rural market. The MDR, or the charge that a merchant pays its respective acquiring bank, is 25 basis points (bps), or 0.25%, Asbe said.