Deep Shah , Lead AEPS
In India, every year central and state government disburses 4% of GDP as subsidies and benefit transfers. During last decade of 20th century & early years of 21st century, almost 50% of the transfers were lost in the system (due to leakages) every year [Amount as huge as Bill Gates’s net worth]. Ghost beneficiaries, ill targeting & ineffective service delivery channels were the prime causes of these leakage/gaps. If these deliveries would have been reaching to intended targets, they could have added more value to economy. Financial inclusion can make the transfer of welfare benefits faster, cheaper, and less prone to leakage. This benefits the state as well as the recipients. Overall, inclusion can help reduce poverty.
Accessibility & availability of these services can be provided to poor people through banking channels. For traditional Banks, to manage these low CASA accounts become operationally unsustainable. KYC cost in onboarding one customer was in the range of INR 300-750. Servicing cost for one customer through branches in Rural area falls in the range of INR 50-85 per visit. To plug the leakages and to liberate the poor/rural from clutches of non-formal financial sector, India was in dire need of a breakthrough which came in the form of “Aadhaar”. The name “Aadhar” can be traced back to an interview in a rural part of India where one of the interviewees had said “Meri Pehchan hi mera aadhaar hai sahib”. And so the name Aadhaar was decided upon for the world’s largest unique identification program.
Now question is how Aadhaar has revolutionized the whole financial inclusion? Prerequisite for financial inclusion was to open an account and KYC cost was preliminary hurdle of onboarding. Aadhaar based eKYC has reduced the cost of KYC to INR 30-35(even lesser than that). Through PMJDY scheme, banks have been mandated to open Aadhaar linked account through eKYC in their SSAs. These account holders have been provided with RuPay debit cards (another significant indigenous development in payments space). Till now 39 crore+ bank accounts have been opened under National Financial Inclusion mission of PMJDY. Now using the Aadhaar mapper, direct benefits are transferred to beneficiaries’ account. To access these funds beneficiary needs an access point which will be viable option for the banks as well. Mind you these are the customers who have said that my identity is my foundation. Then why not to utilize the same as payment instrument?
Hence a payment product was designed under the category of assisted model named as “AePS” (Aadhaar Enabled Payment System). Business correspondence (BC) model was designed, where by approaching any BC these beneficiaries of DBT can access the fund lying the account through AePS. Most important feature came in the form of interoperability, which has increased the accessibility many fold through BC channel. Credit of enabling this product goes to UIDAI & NPCI. The operational cost has been plummeted for member banks through Aadhaar. For rural customer, who was investing almost full day approaching nearest branch to access the fund; can now utilize those productive hours in economic activities as these funds are available at door step through fingertip. & here we are today standing tall by achieving the great degree of satisfaction with respect to bringing unbanked to formalize banking under a decade time. That’s why Aadhaar become a classic case study for the institutions across the globe.
This infrastructure has helped India during the Covid-19 pandemic to enable the direct transfers in the customers’ account. The BC channel through AePS has provided the access of funds. During Covid’19 lockdown, in AMJ quarter; AePS has enabled 23 Cr+ customers to get access via 120 Cr+ transactions with 50,000cr+ value of interoperable transactions in remotest area of India. It clearly shows, “lockdown mein bhi AePS ne BHARAT ko rukne nahi diya hai”
