RBI Takes Action to Safeguard Aadhaar enabled Payment System (AePS)

The Reserve Bank of India (RBI) is taking firm steps to protect Aadhaar-enabled Payment Systems (AePS) after witnessing the surge in fraudulent activities. The central bank is taking proactive measures to enhance security and safeguard consumer’s financial transactions.

AePS is a payment system that allows customers to access basic banking services using their Aadhaar. This correspondent method has gained significant popularity, especially in rural India. AePS payment system offers services such as

• Cash withdrawal
• Balance inquires
• Aadhaar-to-Aadhar fund transfers

This has made banking more accessible to millions of Indian citizens across the country. However, despite its widespread the system faced numerous challenges such as inadequate infrastructure and security vulnerabilities.

Among these vulnerabilities, one of the primary concerns that arises is the lack of two-factor authentication in AePS transactions. This lack of authentication has acted as a loophole and has been exploited in fraudulent activities. Fraudsters who have gained access to Aadhaar card numbers and cloned fingerprints could easily withdraw cash from bank accounts. Moreover, some scammers have illicitly obtained biometric information of users, particularly targeting citizens with limited digital literacy.

In terms of addressing these vulnerabilities associated with the Aadhaar-enabled Payment System, RBI has announced some initiatives its going to embark on during the recent Monetary Policy Committee by RBI Governor Shaktikanta Das. RBIis implementing some stringent security measures. Firstly, RBI is trying to simplify the process for AePS service providers to join and streamline the onboarding process. Additionally, RBI plans to enforce mandatory due diligence for AePS touchpoint operators which will place greater responsibility on banks to verify the authenticity of these operators.

Furthermore, RBI is also considering additional fraud risk management measures to enhance the security of AePS transactions. RBI seeks to instill confidence among consumers using Aadhaar-enabled payment systems by strengthening security measures and enhancing fraud prevention protocols. These proactive steps by the central bank not only aim to prevent risks associated with fraudulent activities but also contribute towards building a more resilient and secure financial ecosystem.