In a major (and unexpected) development, the National Payments Corporation of India (NPCI) has asked banks to discontinue Aadhaar-based payments through the Unified Payments Interface (UPI) and Immediate Payment System (IMPS) channels from August 31st, 2018. Pay to Aadhaar is an additional functionality in UPI and IMPS wherein the payer can transfer funds to the beneficiary using the Aadhaar number of the latter. The development was first reported by the Financial Express.
In a July 17 circular addressed to banks, the payments regulator said, “Aadhaar number is a sensitive information and the revised framework about its usage in the payment landscape is still evolving. With this background, we proposed removal of ‘Pay to Aadhaar’ functionality in both UPI and IMPS before the steering committee (meeting held on July 5, 2018). The proposal of removing the Aadhaar number functionality was approved by the steering committee.” The steering committee for UPI and IMPS is comprised of 18 bank and non-bank payment players, including State Bank of India, HDFC Bank, Citibank, Maharashtra Gramin Bank, One Mobikwik Systems and Paytm Payments Bank. The notice does not make it clear if the feature will be re-introduced if and when the regulatory architecture around the Aadhaar database is implemented.
More business than security
Some commentators were of the view that the decision by NCPI had more to do with the finances of running the said services than any possible security concerns. Srikanth Lakshmanan, a contributor at cashlessconsumer.in, tweeted, “Pure economics. P2A on UPI needs more investment from every bank / PSP to comply with regulatory costs imposed by UIDAI, should they use and store UID. Also not all PSPs may be allowed, distorts level playing field further against non-banks.” He added, “P2A is also not a key use case in UPI. Spending more to keep a feature alive that has very little usage is waste of resources. As such UPI has weak economics, ability to afford non key feature regulatory cost is impossible. PR on privacy, data security is bonus / sideshow”.
The news comes more than a month after the Supreme Court reserved its judgment in the Aadhaar case over concerns around its database and regulatory framework. The apex court also extended the deadline indefinitely for linking bank accounts and mobile connections with Aadhaar until it delivers the verdict. The final verdict for all Aadhaar-related petitions is yet to be delivered.