1. Demonetisation: What India needs to turn into a less-cash society

Demonetisation: What India needs to turn into a less-cash society

A big impediment to ‘pay as you go’ is the requirement of AFA, which is typically an OTP received via SMS. RBI move to give consumers an option to waive off AFA for transactions below R2,000 is laudable

By: | Published: January 5, 2017 6:16 AM
The point to be noted is that the same misuse of card information can also occur at an Indian website or store, but here’s where the cybercrime enforcement comes into play. The point to be noted is that the same misuse of card information can also occur at an Indian website or store, but here’s where the cybercrime enforcement comes into play.

Ancient cities had walls and gates to act as a checkpoint for defence, taxation, health, safety, etc. These gates would typically be locked after sunset to prevent unauthorised people from entering, and more important, to guard against a surprise enemy attack. Modern cities are more open. While toll plazas and tax checkpoints do exist, cities are open and usually allow for free movement within the country.

Payment systems are like modern cities. You know you can trust your fellow citizens, but are always careful about outsiders. These provide seamless connectivity to fulfil transactions, but every checkpoint clogs the system and increases transaction failure rate.

Currently, a big impediment to ‘pay as you go’ is the requirement of additional factor of authentication (AFA), which is typically a one-time password (OTP) received via SMS.

In that context, the recent move by Reserve Bank of India to give consumers an option to waive off AFA for transactions below R2,000 is laudable. This is bound reduce drop rates, and hence accelerate adoption of digital payments in a currency-strapped economy.

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So, what are the pros and cons?

The biggest gainers will be merchants offering low-value goods and services, like taxi aggregators, ticket booking sites, small value e-tailers, etc. Imagine yourself booking a taxi with your pre-registered credit/debit card and stepping out at your destination without waiting for the bill to be presented and OTP for online payment. It is as frictionless as it can get. There could be a million more use cases.

Now, for the risks. A card number without OTP could be misused by a rogue merchant to debit your card account without authorisation. Worse, your card number could be used at an overseas website or store, which may not be mandated to follow AFA. Of course, you have recourse to standard chargeback process, but then this is an inherently risky affair for all parties concerned, i.e, the consumer and her issuing bank.

The point to be noted is that the same misuse of card information can also occur at an Indian website or store, but here’s where the cybercrime enforcement comes into play. If the merchant/IP address is within India, local cybercrime enforcement officials can at least trace and try to apprehend the culprits. However, if the criminal is sitting overseas, matters become very complicated. International cybercrime protocols are yet to be formalised, and again, establishing the entire crime trail could be an exercise in futility.

Here’s what your banks and card associations could do to protect you from the unknown international risks:

w Ensure that every merchant using online payments is issued a common PAN-like ID number and is fully KYC-ed and verified;

w Ensure that the merchant contact details are regularly updated and monitoring checks are in place to ensure validity and correctness of information;

w Rather than providing the cardholder an ‘opt out’ option from international payments, have an ‘opt in’ option, i.e, by default all cards are deactivated at international merchants unless specifically requested for by the cardholder;

w Ensure a user-friendly intuitive ‘opt out’ service for cardholders to cancel the waiver and revert to AFA required;

w Educate cardholders about risks and benefits in online transactions and incentivise good behaviour in the form of better credit ratings, etc;

w Have a transparent and time-bound chargeback process, where the cardholder gets credit back into the account instantly for proven disputed transactions.

Cities thrive on efficiency, which is based on the assumption of safety and security. Similarly, if payment systems can guarantee that to all stakeholders, there is no reason why the dream of a less-cash India cannot be achieved.

 

The author is CFO, TechProcess Payment Services. Views are personal

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  1. A
    Abdul
    Jan 5, 2017 at 5:19 pm
    India needs a digital device replaces the habit of using cash, so easy to use that people are not forced to be cashless but become cashless by choice,this device may be be distributed by bank to account holders,device indeed will be like a modified mobile and usines stop step process for transaction,this device should only be using the net connection to its own bank and other banks ,you carry a wallet given by your bank to which can be charged by the same e debit/credit card from cashless ATM like machine which should be installed at places of public places ,and can be installed at your home too,it should carry many features like paying money from 1 rupee to anty amount you need,and issue receipt from seller to buyer and vice versa,you check your transaction ,check you account status,order check book,make free pH calls to your bank,browse banks website,each transaction should be authorized by thumb impression matching to adhar deatail,charge your wallet from banks wallet machine using your debit card instead of cash your wallet will be charged.Using so much of pain is for banks to take all responsibility for transaction and not customers,this will take time during this cash should be used without giving more pain to people, India will become less cash econonomy in 2 to three years,planning and I stazllation takes time so why give pain to people.Imagine a person goes to bank take 2000 rupees in cash from ATM,charged wallet for 50 thousand to wallet and keeps his debit card in pocket, this is what I think government is looking for less cash economy,the device should be blocked from all kinds of websites only banking connection should be used,so no viruses and this and that ,this device can easily be made using tech ologies currently been used,they all are open and and risky and prone to security and fraud ,so sensible man would use it,the device alternative to cash should so that it is almost like using cash.
    Reply
    1. Sundar BN
      Jan 5, 2017 at 3:23 am
      What Indians need to do to turn into a cashless society is, for the moment, to relo to Pak, B'Desh, Bhutan and N Korea in large numbers, surely ?
      Reply
      1. R
        R. Singh
        Jan 5, 2017 at 4:51 am
        Kejriwal ka putra
        Reply

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