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The Unique Identification Authority of India has recommended that merchants using the Aadhaar Payment app or AadhaarPay should be incentivised.
“UIDAI has recommended that merchants using AadhaarPay for doing transactions should be given incentives by the issuer bank on the same lines as given under the Aadhaar Enabled Payment System,” Ajay Bhushan Pandey, Chief Executive Officer, UIDAI said.
AadhaarPay, which was working on Aadhaar Enabled Payment System, is now migrating to recently launched BHIM app. In an interview with BusinessLine , Pandey said: “For Aadhaar Payment app, the merchant should be treated at par with a business correspondent and should not be subject to pay merchant discount rate to the banks as is the case with other plastic or digital transactions.”
To encourage banks to accept digital payments, the RBI came out with the concept of merchant discount rates. It is basically a charge to a merchant by a bank for accepting payment from their customers in credit and debit cards.
“To facilitate digital transactions, the banks provide payment service devices and infrastructure and charge merchants in return. The merchant discount rate is taken as a percentage of the transaction amount.
“Unlike other plastic or digital transactions where payment systems players bear the costs — swipe machines, plastic cards, so on and so forth — in the case of Aadhaar Payment it is the merchant who is bearing all costs — getting the device, using his/her phone, and bearing cost of data charges.
“Therefore, in all fairness, it is the merchant who should be incentivised because the transactions is in goods and relieve banks from the burden of cash management,” he said.
Asked who should be bearing the incentive cost, he said, “it should be the issuer bank”.
On whether AadhaarPay can be a replacement for the debit card, he said it works like a debit card, but without requiring the infrastructure used for debit facility. “It is not a replacement, but can be called an alternative mode of payment,” he stated.
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