India’s payment gateway to be linked to UID numbers

India’s payment gateway to be linked to UID numbers

New Delhi: The National Payments Corp. of India (NPCI) plans to link Rupay, its soon-to-be-launched domestic payment gateway on the lines of global gateways such as Visa and MasterCard, with the unique identification programme Aadhaar.

The move will allow customers to use their Aadhaar identity - a unique set of 12 numbers that would be issued to all residents of the country - and their fingerprints registered under Aadhaar as their banking password.

“Just like a bank gives a gold or a platinum card, Aadhaar Rupay cards will be offered by the banks," said A.P. Hota, managing director and chief executive officer, NPCI, which is overseeing the Rupay project.

The Rupay will be on the lines of China’s UnionPay, which allows domestic transactions to be routed through a national card system. Although China has made it mandatory for all local transactions to be routed through the national card system, it will not be compulsory in India.

Rupay is expected to be launched this fiscal. The Reserve Bank of India has already approved the Aadhaar-enabled payment system.

“In the second phase, we are also mulling enabling the Aadhaar number to be printed on the card, so that there are no mistakes while punching the 12-digit number," Hota said.

A pilot programme is currently running in Jharkhand with the help of Bank of India, Union Bank of India and ICICI Bank Ltd.

“The pilot is restricted to non-financial transactions for the time being. We are fine-tuning the system so it can be ready to handle financial transactions," Hota said.

The payment system and software are in place, said a Bank of India executive, requesting anonymity. “This is a new concept and needs to be recognized and accepted. The challenge for the banks will be to create the necessary infrastructure," the executive said.

It will take time for Aadhaar numbers to reach people, and for the hand-held terminals with biometric readers to be distributed - two measures critical for the project to succeed, he said.

The Unique Identification Authority of India (UIDAI) has so far enrolled more than 4.5 million people and targets issuing Aadhaar numbers to 600 million people by 2014.

The Aadhaar-enabled Rupay system will also allow correspondents of one bank to offer payment services to customers of another bank, Hota said.

The Bank of India official, however, said, such interoperability will take some time. “Interoperability is allowed, but only in theory. There needs to be a payment and settlement system, which defines how participating banks will settle the payments," the official said. “Till a payment-clearing house is put in place for this micro-payment system, interoperability cannot be implemented."

He said banks will wait until the intra-bank system stabilizes before moving to the inter-bank transactions. “Once more Aadhaar numbers are given, it can be scaled up to a pan-India level."

“Though MasterCard and Visa have already announced their intentions to support Aadhaar-enabled payment system, it will be easier for Rupay to launch it as they can make it a part of their system from the very beginning," said a government official who is privy to UIDAI’s plans, but did not wish to be named.