India’s Payments Ecosystem: UPI, AePS, PAs and PPIs Compared
Why in the news
A review of India’s payment channels looked at how UPI, AePS, payment aggregators and prepaid instruments support financial inclusion, and where RBI rules still leave gaps.
Key facts
| Channel | Start | Highlights |
|---|---|---|
| UPI | 2016 | Real-time person-to-person and merchant payments by mobile app; many bank accounts can be linked to one app; May 2025: 18.68 billion transactions worth ₹25.14 trillion |
| AePS | 2011 | Run by NPCI; micro-ATM banking with Aadhaar and biometrics, giving withdrawals, deposits, transfers and balance enquiry without a card or phone; targets rural and semi-urban areas |
| Payment aggregators (PAs) | – | In-principle RBI approval to 32 physical PAs |
| Prepaid instruments (PPIs) | – | Players include Amazon Pay, MobiKwik, Spice Money, Pine Labs and some NBFCs and banks |
AePS issues
- Fraud: ₹585.79 crore lost out of ₹10,247 crore of transactions (Jan 2019 to May 2023).
- RBI guidelines (June 2025): stricter KYC for AePS Touchpoint Operators (ATOs), regular monitoring of transaction patterns, and risk classification of ATOs by profile, mobile or static type, and transaction speed.
- Gap: the rules do not cover corporate business correspondents, who link banks to ATOs.
- Bank preference: public sector banks favour BCs over ATOs and cap AePS volumes; the flat ATM interchange fee is ₹19.
- Cash deposits: few banks allow interoperable deposits; RBI may explore third-party deposits, where one person deposits into another’s account.
PAs and PPIs
- Suggestion: allow QR-code-based cash withdrawal so PAs act as micro-ATMs.
- RBI now bars loan EMI payments through wallets funded by credit cards on BBPS; tracking fund sources is hard because money is fungible.
- Suggestion: permit wallet-based loan repayment, including current dues, to cut collection costs in microfinance.
Way forward
- Close gaps in fraud prevention, especially for AePS and ATOs.
- Bring regulatory parity for corporate BCs and PPIs.
- Improve interoperability and review transaction caps for PSBs and AePS.
Exam angle
- Operator of AePS: NPCI; year of launch 2011.
- UPI launch year: 2016.
- Related terms: ATO, BC, PA, PPI, BBPS, micro-ATM.