Aadhaar Payment App Not Without Issues

The Aadhaar payment app, another part of India Prime Minister Narendra Modi’s initiative to establish a cashless society, was launched this week and allows customers to make free transactions across the banking system via Android mobile devices.

Merchants are enabled to accept payment from any customers registered into the system with the use of a biometric reader, which allows them to avoid the charges that banks or card networks normally impose.

But with the new launch have arisen some issues with the new payment method.

The biggest, Forbes contributor Tim Worstall explained, is the fact that much of India’s population is unbanked and therefore cannot participate in the Aadhaar payments system at all.

While efforts are being made to shift the entire country’s population to being banked, it’s an incremental process that will take a great deal of time and effort to come to fruition. The Indian government’s goal is to eventually do away with plastic cards and POS terminals by continuing to build off the country’s biometric-powered national ID Aadhaar system — a 12-digit unique identification number that encompasses biometric information of registrants, including fingerprints and iris scans.

According to Worstall, relying entirely on biometrics can be risky considering that no automatic or electronic biometric system is 100 percent accurate.

Though Worstall expects that the availability of a useful and cheap payment system will help to encourage adoption by more of the unbanked population in rural areas, he also noted that it will not happen overnight. Therefore, it will take time for this incremental change to take place rather than it being a seismic, immediate transformation of the country’s payment landscape.