To promote digital way of payment, FM Arun Jaitley in his Union Budget speech said, “The government will launch a Aadhaar Pay – a merchant version of Aadhaar Enabled Payment System.”

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He said, “A Mission will be set up with a target of 2,500 crore digital transactions for 2017-18 through UPI, USSD, Aadhar Pay, IMPS and debit cards.”

Aadhaar Payment is a new android smartphone application, which will be offered by government to push digital transactions.

How does the Aadhaar Pay work?

Merchants are needed to download the Aadhaar Payment app on their android phone connected to a biometric reader. A person can make their payments by just entering his/her Aadhaar Number in the app and select the bank from which the transaction is supposed to be carried and use the biometric scan as the password for the transaction. 

Once entered the Aadhaar number, the app would automatically search the bank accounts linked to your Aadhaaar number. 

Aadhaar Pay will be made available on the  Bharat Interface for Money (BHIM) app. 

National Payments Corporation of India (NPCI) said, "It was a moment of pride for all of us to see Hon’ble Finance Minster mentioning about Bharat Interface for Money (BHIM) and its potential to take India towards digital economy in his budget speech today."

It added, "We are happy that the government is focusing on digital payments and considering our products to cater to our diversified population. We will support the mission of achieving 2,500 crore digital transactions for FY 2017-18 through UPI, USSD, IMPS, Aadhar Pay, RuPay Debit cards and other upcoming products of NPCI."

Cabinet hopes to introduce 20 lakh Aadhaar based POS by September 2017. 

Aadhaar is being increasingly used to carryout payments under various government schemes.  Till now, more than 33.87 crore transactions have been carried out through the Aadhaar-enabled payment system (AEPS) with 119 banks operating on it.

Recently,  Ajay Bhushan Pandey CEO of Unique Identification Authority of India (UIDAI) said, "There are currently 1.31 crore transactions per day through Aadhar and we can handle up to 10 crore transactions per day. We will soon be able to manage 40 crore transactions each day.”

Currently, more than 14 banks have already been integrated with Aadhaar Pay. 

Further proposals like introducing additional 10 lakh point-of-sale (POS) terminal by March 2016. Also proposals are made to create a Payments Regulatory Board in the Reserve Bank of India by replacing the existing Board for Regulation and Supervision of Payment and Settlement Systems

NPCI said, "By banks deploying more PoS terminals, introducing incentivizing schemes and creating use cases, we are confident that NPCI’s Mission to ‘Touch Every Indian by 2020’ will be achieved comfortably. NPCI will continue to innovate and introduce new payments mechanism to support the ecosystem.”