As part of customer protection, RBI has directed banks to make good the loss on account of unauthorised digital transactions if customers report the same on time
K Srinivasa Rao
Digital footprints in financial intermediation are on an exponential rise. Digital banking channels are fast reaching out to rural areas with business correspondents (BCs), and retail grocery outlets are being equipped with Point of Sale (PoS) machines. Rural business community has understood the merits of accepting digital wallets. The PMJDY is being made an open-ended scheme, with focus shifting from covering ‘families’ to ‘individuals’—this will accelerate opening of new accounts and issuance of debit cards, adding to the scope of digital banking.
On the recommendations of Nachiket Mor Committee, differentiated banks are being rolled out. More significant is the setting up of payments banks. The India Post Payments Bank (IPPB) holds more potentiality due to its deeper reach in the hinterland, with 1,55,000 post office outlets. Payments banks can play a greater role in digital payments space as they are not allowed to lend. In addition, about 1,000 fintech companies are collaborating with banks and have floated diversified prepaid payment instruments (PPI).
Banks and card issuing firms have provided ‘payment gateways’ to enable quick online payments. Internet and mobile banking transactions are generally supported by dual authentication based on OTP routed through registered mobile number. With a huge digital banking infrastructure, the user base is set to increase manifold. Along with spurt in digital bank users, the systems are getting exposed to cyber threats. The digital mode is convenient and accessible any time, but unless the user is conscious about operational risks, it will be difficult to ensure customer protection.
RBI has liberalised interoperability among entities using PPI and digital wallets. PPI holders can transfer funds from one PPI to another, and also to a bank. Account portability methods among banks are being worked out to expand the scope of digitisation. With internet user base expected to rise from 500 million in June 2018 to 730 million by 2020, and smartphone base from 339 million to 402 million, there will be a substantial rise in digital transactions.
Yet a large number of potential customers are apprehensive about digital services. Compared to debit cards issued, ATM hits are far from satisfactory. To allay their fears, customer education is a must. RBI has started a campaign to spread the message on financial and digital literacy. It is in public interest to sensitise bank customers. But conducting responsible banking is the onus of customers, too. Today, cyber attacks are on a rise. Fraudsters are on the lookout for finding weaknesses both from bank and customer angles. Stealing identity and pilfering digital money is possible in many ways, unless the customer is cautious and joins banks and regulators in safeguarding digital banking space.
As part of enforcing customer protection measures, RBI has directed banks to make good the loss on account of unauthorised digital transactions if the customer reports it to banks within three working days, provided the customer has not compromised identity credentials. There is limited liability to the customer if reported in 4-7 days, and if wrongful transactions are reported after seven days, banks can deal with the same in terms of Board-approved policies. Subscribing to banks’ SMS can bring wrongful transactions to the notice of customers quickly.
In our quest towards digital banking, every stakeholder needs to join in effectively sanitising digital banking space. Business entities, institutes, schools, colleges, corporates and social activists have to broadcast messages educating the public on how to safely use digital banking. A sustained and collective commitment is necessary. Today, digital banking is not an option, it is part of development and, therefore, digital literacy must be comprehensive. Augmenting resources to bring digital literacy to the centre-stage can make our digital financial intermediation safe and fraud-proof.
The author is Director, National Institute of Banking Studies & Corporate Management, Noida. Views are personal