AEPS: Aadhaar Enabled Payment System

AEPS, the Aadhaar Enabled Payment System, is India interoperable banking service that lets a customer perform basic banking transactions at a micro ATM using only their Aadhaar number and their fingerprint, without a card or a PIN. It was built by the National Payments Corporation of India, known as NPCI, to bring banking to people who do not have a debit card or who cannot remember a PIN, particularly in rural areas. The customer authenticates with their biometric, and the transaction is routed through the NPCI switch to their bank, which debits or credits their account. AEPS is one of the most important financial inclusion systems in the world, processing hundreds of millions of transactions a month. Why AEPS exists is that a large part of India population does not have easy access to a bank branch or an ATM, and many do not have a debit card. The Aadhaar identity system, which covers over 1.3 billion people, provides a universal identifier, and the biometric authentication provides a way to prove identity without a card or a PIN. AEPS lets a banking correspondent, a local agent with a micro ATM, serve as a human ATM: the customer walks to the agent, provides their Aadhaar number and fingerprint, and can withdraw cash, deposit cash, check their balance, or transfer money. The agent is paid a commission by the bank, and the customer pays no fee for basic transactions. The parties are the customer, the banking correspondent with the micro ATM, the NPCI switch, the customer bank, and the Aadhaar identity system operated by the Unique Identification Authority of India, known as UIDAI. The customer provides their Aadhaar number and fingerprint to the micro ATM. The micro ATM sends an authentication request to UIDAI, which verifies the fingerprint against the Aadhaar database and returns a yes or no. If the authentication succeeds, the micro ATM sends the transaction request to the NPCI switch, which routes it to the customer bank. The bank checks the account balance, performs the transaction, and returns a response through the switch to the micro ATM, which prints a receipt. In practice the transaction types are cash withdrawal, cash deposit, balance enquiry, mini statement, and Aadhaar to Aadhaar fund transfer. A cash withdrawal works like this: the customer selects withdrawal on the micro ATM, enters their Aadhaar number, selects their bank, enters the amount, and places their finger on the scanner. The micro ATM sends the authentication request to UIDAI, which returns a success. The micro ATM then sends the withdrawal request to the NPCI switch, which routes it to the customer bank. The bank checks the balance, debits the account, and returns a success. The micro ATM prints a receipt, and the banking correspondent hands the cash to the customer. The whole process takes under a minute, and the customer does not need a card, a PIN, or a phone. A worked example shows the limits and the economics. A customer in a village in Uttar Pradesh wants to withdraw INR 2,000 from their account. They go to the local banking correspondent, who has a micro ATM. The customer enters their Aadhaar number, places their finger on the scanner, and enters INR 2,000. The authentication succeeds, the bank debits the account by INR 2,000, and the correspondent hands over the cash. The bank pays the correspondent a commission, typically INR 5 to INR 10 per transaction, and the NPCI charges a small switch fee. The daily transaction limit for AEPS is set by the bank, typically INR 10,000 per day, and the per-transaction limit is typically INR 10,000, although the bank may set a lower limit. The customer pays no fee for the withdrawal. What happens when AEPS fails is usually an authentication failure or a connectivity failure. If the fingerprint does not match, which happens when the customer hands are worn from manual labour or the scanner is dirty, the authentication fails and the transaction is declined. The customer can try again, or can use an alternative authentication such as an OTP sent to their registered mobile number, if the bank supports it. If the connectivity fails, because the micro ATM is in an area with poor network coverage, the transaction cannot be completed and the customer must try later. If the transaction is debited but the cash is not dispensed, which is rare, the customer must raise a complaint with the bank, and the bank must reverse the debit within the timeline set by the Reserve Bank of India, which is typically within a few days. The operational and accounting implications are that the bank must manage its network of banking correspondents, monitor their performance, and reconcile the AEPS transactions daily. On the ledger, an AEPS withdrawal is a debit to the customer account and a credit to the correspondent settlement account, and the correspondent is paid from that account. The bank must also reconcile the NPCI settlement file against its own ledger, and must investigate any differences. The finance team must track the commission paid to correspondents, which is a cost, and the risk team must monitor the fraud rate, because AEPS is vulnerable to biometric spoofing and to correspondent fraud. For a business analyst, AEPS is a financial inclusion and operations subject. You must specify the transaction types, the authentication flow, the limits, the commission structure, the correspondent onboarding, and the complaint handling. You must also specify the fallback when biometric authentication fails, and the reconciliation process. A common gap is failing to specify the offline behaviour, because the micro ATM may lose connectivity, and the system must handle that gracefully without losing transactions or double-debiting the customer. Takeaway: AEPS turns a fingerprint into a bank branch, and the banking correspondent is the human interface that makes it work. Further reading: the NPCI Aadhaar Enabled Payment System procedural guidelines; the Reserve Bank of India directions on AEPS; the Unique Identification Authority of India for Aadhaar authentication. Last reviewed 7 November 2026.