Context

Recently, The National Payments Corporation of India (NPCI), in a circular, has issued guidelines that put the onus of verifying merchant details on acquiring banks for BHIM Aadhar Pay.

BHIM Aadhar Pay 

BHIM Aadhaar Pay enables Merchants to receive digital payments from customers over the counter through Aadhaar Authentication. 

• It allows for any Merchant associated with any acquiring bank live on BHIM Aadhaar Pay, to accept payment from customers of any bank by authenticating customer’s biometrics. 
• Prerequisite : 
  • To be able to effect the same, merchants should have an Android mobile or any supported device with BHIM Aadhaar Pay app and certified biometric scanner attached with mobile phone/Kiosk/Tablet on USB Port or Micro-ATM/POS, mPOS. 
  • Both Customer and Merchant should have their Aadhaar linked to their Bank Account.

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Reference Guidelines for Merchant Acquisition Standards- BHIM Aadhaar Pay

The NPCI issued these guidelines to an acquiring member bank’s key responsibilities and accountabilities when managing merchants.

• An Acquiring Member Bank must monitor its Merchant activity (viz., on-boarding criteria, transaction monitoring & control, training, assessment of the portfolio metrics, etc.) periodically. 
  • These monitoring standards for merchants is a baseline for the level of oversight on Merchant performance. 
  • Acquiring Member Banks can use both manual as well as digital modes of merchant due diligence.
• Acquiring Member Bank should ensure the following points are in place and the same is adequately addressed:
  • Board approved policy for Merchant acquisition : 
    • Implement policies that include standards to ensure quality / business conduct to mitigate risk to the NPCI operated payment system in terms of financial or reputational risk.
    • The policies must be approved by the Acquiring Merber Bank’s Board of Directors and should have a periodic review mechanism.
  • Agreements with various stakeholders (as appropriate) : 
    • Merchant agreement in place with each merchant/ aggregator (as appropriate) before any service is provided.
  • Merchant underwriting : 
    • It has advised members to assign appropriate Merchant Category Code (MCC) while taking on board merchants. 
  • Merchant portfolio and risk monitoring : 
    • They are required to ensure that cash withdrawal transactions are not allowed on the BAP service’s merchants by categorizing Merchant Criteria &  Prohibited Merchants.
  • Merchant training
  • Third party agent risk oversight and governance