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IDFC Bank is first off the block to launch Aadhaar Pay sans MDR

IDFC Bank has become the first bank to launch the Aadhar Pay. The solution is called IDFC Aadhaar Pay and the bank said that it launched it after a pilot in 16 states where they on boarded over 1500 merchants on their smartphones. It added that it is targeting a reach of 50,000 – 75,000 merchants in the next two years. These will be IDFC Bank’s extended points-of-presence.

The government launched the Aadhaar Pay in January. Currently, 14 banks have signed up for the new payment system. On Aadhaar Pay, customers can pay at a merchant using their bank account linked with Aadhaar. To process payments, the customers will need to provide their Aadhaar number to the merchant and authorize payment through their fingerprint. The solution requires a biometric device to be linked to merchant’s mobile phone for payment authentication but customers do not need the phone at all.

Specifically for IDFC Aadhaar Pay, the app is made available on a merchant’s smartphone. Customers can pay the merchant by selecting the bank’s name and filling only the Aadhaar number. The customer’s fingerprint is used to authenticate the transaction. A scanner will be attached to the smartphone similar to how Reliance Jio does Aadhaar eKYC.

A merchant is on-boarded with IDFC Bank using e-KYC, within an hour. An SMS link enables the merchant to download the IDFC Aadhaar Pay app on any basic smartphone.

Most importantly, the bank added that there is no merchant discount rate (MDR) attached to the Aadhaar Pay as it is running on the Aadhaar Enabled Payment System (AEPS) railroad. The AEPS is a financial inclusion product developed by the National Payments Corporation of India (NPCI) which allows cash withdrawal, deposit and funds transfer at POS (MicroATM) through a business correspondent of any bank using the Aadhaar authentication.  A look at the number of transactions on the AEPS here.

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Note that the Unified Payments Interface (UPI)  does charge an MDR to merchants. Last time we checked, the NPCI’s chief operating officer Dilip Asbe said that merchants will be charged 25 basis points for transactions below Rs 2,000. The second version of the UPI is supposed to have Aadhaar integration by March 2017.

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