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May 26, 2014

RBI postpones Aadhaar-based payment plan mechanism

The Reserve Bank of India (RBI) has postponed Aadhaar-based payment plan mechanism following objections raised by the banks and other financial intuitions, according to The Economic Times.

By Verdict Staff

The Reserve Bank of India (RBI) has postponed Aadhaar-based payment plan mechanism following objections raised by the banks and other financial intuitions, according to The Economic Times.

In November last year, RBI ordered that all new ATMs and POS machines should be tailored to accept Aadhaar-linked payment; however, bank CEOs had opposed this move.

They argued that the proposed mechanism is expensive, risky and would serve only a handful of clients.

"The project made no sense — the network has to be overhauled and ATMs and point-of-sale (POS) machines with merchants have to be upgraded with biometric readers," chief technology officers and payment experts told the panel examining the project.

In order to execute Aadhaar-based payment processing, the banks and other associated intuitions will have to upgrade network and ATMs and point-of-sale (POS) machines with merchants have to be overhaul with biometric readers.

Also, there are technical hurdles: "Data on magnetic swipe of a credit/debit card is transmitted through telephone lines. Biometric data will need high speed connection and the bandwidth and capability has to be raised. Besides, in biometric mode, response time and rejects may be higher and transaction could take longer," one of the service providers told the publication.

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