Transaction Failure Rates in the Aadhaar Enabled Payment System: Urgent Issues for Consideration and Proposed Solutions

17 Pages Posted: 21 May 2020 Last revised: 26 May 2020

See all articles by Malavika Raghavan

Malavika Raghavan

London School of Economics & Political Science (LSE); Future of Privacy Forum

Date Written: May 18, 2020


The Aadhaar enabled Payment System (AePS) has witnessed a surge in transactions during India’s COVID-19-induced lockdown. Many providers have pivoted to use of this system as bank branches experienced service disruptions in the early weeks of the lockdown, limiting the cash-out points in India. This coincided with a huge demand for cash withdrawals by vulnerable citizens in response to announcement of cash transfer schemes by Central and State governments. Many migrants who are part of the mass exodus away from affected cities have heightened reliance on wayside shops and MicroATMs to access cash.

Worryingly, the rise in AePS transactions has been accompanied by reports of a spike in transaction failure rates. This has serious consequences for consumers who desperately need to access and remit cash to stay afloat in the crisis. Unfortunately, limited published evidence and analysis of the nature of these transaction failures exists.

This policy brief identifies the most serious categories of AePS transaction failures based on data and conversations with four financial institutions with a combined presence across the country. To understand the levels at which these failures occur, the AePS process flow is described in Section 2. Section 3 describes our understanding of the main reasons for AePS transaction failures, especially in April 2020,and highlights the impact on consumers. Section 4 of this brief proposes some immediate and medium-term solutions for urgent discussion, given the enormous costs these failures externalise to the most vulnerable users of India’s financial services infrastructure.

Keywords: financial inclusion, aadhaar, AePS, payments, digital payments, payments infrastructure, consumer protection, digital finance, India, COVID-19

JEL Classification: Z18

Suggested Citation

Raghavan, Malavika, Transaction Failure Rates in the Aadhaar Enabled Payment System: Urgent Issues for Consideration and Proposed Solutions (May 18, 2020). Available at SSRN: or

Malavika Raghavan (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Future of Privacy Forum ( email )

United States

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