14 DAY TRIAL // India's central bank, called the Reserve Bank of India (RBI), has released new mandatory guidelines for the way online credit card transactions are processed, requiring the implementation of an additional verification system based on cardholder details not available on the card itself. The Internet & Mobile Association of India (IMAI) argues that this is unnecessary and will only make such transactions more difficult.
The RBI provisions mandated that banks must put in place, until the 1st of August, "a system of providing for additional authentication/validation based on information not visible on the cards for all on-line card not present transactions." In addition, cardholders will have to be alerted of all such transactions exceeding the value of 5,000 Indian rupees ($103).
While IMAI appreciates RBI's efforts to protect the interest of consumers, it questions the preparedness of the Indian e-commerce sector for such changes, in the light of an already unstable infrastructure. The association explains that people are already finding it difficult to perform online transactions, because of significant down-times with the payment gateways, and claims that additional verification mechanisms will further affect the user experience.
The organization further argues that fraud accounts only for 0.16% of the e-commerce transactions in India and explains that most of this already small percentage involves international credit cards. "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," it explains.
It is also pointed out that, in India, where e-commerce is rather new and still in its first stages of evolution, the losses resulting from fraud fall onto the merchants and not the banks or the credit card brands. Because of this, such a requirement, putting extra burden on the already troubled merchants, will discourage the evolution of this developing sector.
"If we were to look at international trends, 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, these practices are at best recommendatory in nature," IMAI concludes.