Beginning Aug. 1, The Reserve Bank of India (RBI) is requiring all online credit and debit card transactions to include an extra level of authentication in addition to the user name, card number, card expiration date and card verification value (CVV). RBI is mandating that, before an online sale worth more than $102 American (5,000 Indian rupees) can be completed, the buyer must provide a piece of personal information not included on the payment card.
The mandate is being criticized by the Internet & Mobile Association of India (IMAI), which issued a statement asserting the measure will do little to prevent online fraud, since it will pertain only to payment cards originating in India. What it might do more effectively is make life hard for India's online retailers, said the group. "India is in an evolutionary stage in E-Commerce and this RBI directive may end up being the biggest deterrent to E-Commerce in the country, rather than an enabler," said the IMAI statement.
The IMAI conceded the measure "is a good move by RBI to safeguard the interests" of Indian people using payment cards to buy stuff online. However, if the IMAI's concerns are valid, the mandate is likely to mean those online purchases will not be made at India's already rickety sites which might give up the ghost if forced to process another piece of security info.
"In the present e-commerce environment in India, the banks are merely payment enablers – the risk arising from non-payment or fraud is borne by the merchant site and not the banks, nor the card companies Visa and MasterCard," said the IMAI statement. "The customers as well as banks are thus safeguarded from online card fraud, it is the merchants who bear the risk of card fraud. Implementation of these guidelines will have a serious implication on the already troubled online merchant. Most online merchants today have been facing recurring down-time issues with payment gateways – additional verifications will only increase their problems."
The association wants the bank to postpone the measure at least until the country's retailers and banks can get themselves technologically capable of dealing with it. It also pointed out that this extra level of security isn't being mandated elsewhere. The IMAI noted "even countries with much larger E-Commerce markets than India, as well much higher online card fraud levels like USA and UK, do not have mandatory requirements for additional verifications like the one RBI is proposing."
The association cited the Internet Crime Complaint Center (IC3) determination that the US and the UK are the "largest online fraud perpetrating countries" and it said India "does not even feature in the top 10 online fraud perpetrating countries which account for 95 percent of online fraud reported worldwide." The IMAI also stressed the new bank rules will not pertain to online transactions using information from cards outside of India, commenting, "International cards, the largest perpetrators of fraud, will not be governed by this directive, hence we can expect little respite from online card fraud even with the directive."
RBI, noting the use of payment cards for online transactions has been increasing rapidly in India, said it has been "reviewing various options to enhance the security of online card transactions" and came up with the new rules "after extensive consultations with banks/card companies."