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eMudhra launches Aadhaar-based digital payment system

Livemint:  September 13, 2017

Hyderabad: eMudhra, a technology, digital identity and transaction management company, on Tuesday announced the nationwide launch of its Aadhaar eSign-based National Automated Clearing House (NACH) gateway for large and small enterprises to collect recurring payments from customers.

The new initiative from eMudhra is aimed at helping slash costs for enterprises and to bring about accountability in payment processes, said V. Srinivasan, chairman, eMudhra.

With NACH, the company , which is a certifying authority in India to issue digital signature certificates, aims to facilitate paperless electronic transactions which are repetitive and periodic in nature.

Under eMudhra’s digital signature system, a customer can authenticate a payment process with a one-time password (OTP), which will be sent to the mobile number linked to his/her Aadhaar number, while initiating a purchase with recurring payments. An alternative to the OTP is the usage of the biometric fingerprint scanner.

With its latest initiative, eMudhra expects to cut down 95% of transaction-related costs.

“It will also bring in efficient banking for the customers. Let’s say you go to a white goods shop to purchase something on instalment. The entire thing was done on paper. With this, customers can just e-sign and it will be processed through NACH for verification. Our role is to authenticate the documents (online),” said Srinivasan.

Srinivasan pointed out that the digital payment system is highly secure, and that one cannot alter a digital signature. “The eSign based NACH mandate will offer huge benefits in terms of legal non-repudiation, significantly lower costs and eliminate errors since the entire process is now digital,” he said.

About half-a-dozen banks, including Oriental Bank of Commerce, Punjab National Bank and Syndicate Bank, have tied up with eMudhra’s NACH, he added. “We have already started working with them (to set up the new service),” Srinivasan said, adding the product took 8-9 months to complete.

The company will handle between 25-30 million transactions in the next one year, said a press release from the company.

“Digital payment gateways are secure and linking of bank accounts with Aadhaar card will in fact prevent misuse and help in authentication. The same system is being used on other platforms as well,” said Anusha Kurupathi Parambil, co-founder and chief executive officer (CEO) of Hyderabad-based Paymatrix (owned by Speckle Internet Private Ltd), a start-up which provides solutions for online property rent management.

An analyst with experience in the digital payments sector, who was unwilling to be named, however, pointed out that there is the issue of protecting customer data once it is collected. “Recently, Aadhaar data was leaked easily. Though the payments are secure, we don’t yet know how safe the (customer) information will be once it is collected by companies like eMudhra, as it can be leaked as well,” he added.

In response, a company representative said, “In the process of signing mandates, the customer data is retained by Banks and other originating agencies such as Insurance Companies, Telecom Providers, etc. eMudhra only issues eSign for the NACH mandate based on a regulated process where only the hash of the message is used and not the actual data. eMudhra does not collect, store or process any customer information as part of the eSign process, so there’s no question of data being leaked.”

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.