RBI Mulls Additional Factor Authentication For CNP Transactions Below INR 2000

In a new move by the Government to ease the ongoing drive towards demonetisation, the Reserve Bank of India (RBI) has reportedly relaxed norms for additional factor of authentication (AFA) for payments up to INR 2,000 for online card not present (CNP) transactions.

An official statement issued by the RBI said, “The relaxation for AFA under such solutions shall be applicable for card not present transactions for a maximum value of INR 2,000 per transaction across all merchant categories. Banks and card networks are free to facilitate their customers to set lower per transaction limits.”

Under the current model, the card issuing banks will offer payment authentication solutions of the respective card networks to their customers on an optional basis. Users selecting this facility will have to go through a one-time registration process that would require the entry of card details and AFA by the issuing bank. Thereafter, the registered customers will not be required to re-enter the card details for every transaction at merchant locations that offer this solution and consequently save time and effort.

RBI has mandated that the authorised card networks should provide these payment authentication solutions with participation of card issuing and acquiring banks. Mastercard has a payment authentication solution in form of MasterPass while Visa has a similar offering via Visa Checkout.

Commenting on the development, Chanda Kochhar, MD and CEO, ICICI Bank said, “The RBI has maintained stability in monetary policy with a focus on the medium-term inflation targets being sustainably achieved, while continuing to be supportive of growth. The policy has maintained an accommodative stance while taking into account global developments and domestic economic conditions. With respect to demonetisation, the assessment that this will have only a transient impact on growth is welcome. With regard to liquidity and interest rates, the withdrawal of the incremental Cash Reserve Ratio requirement and the use of other instruments such as the Market Stabilisation Scheme to manage liquidity is welcome. Deposit and lending rates are expected to continue to show a downward trend going forward.”

RBI has further said the banks/networks/institutions to put in place a check on how many such small value transactions will be allowed in a day/week/month as considered appropriate. Keeping in mind the security concerns of users, RBI also said the banks and authorised card networks offering such solutions will bear the full liability in the event of any security breach or compromise in the authorised card network.

Welcoming the move, online cab aggregator Ola said in a statement, “We welcome the timely move from the Reserve Bank of India to do away with two factor authentication for low value, card-not-present transactions. This will definitely encourage more users to switch to debit and credit cards for online payments. The convenience of a wallet like Ola Money and now, seamless payments with cards, will be a shot in the arm for digital transactions in India.”

In the past few months, the RBI has initiated many services to smoothen investments in the country and to support the startup and digital ecosystem of the country. This includes approval to buy mutual funds via e-wallets; Paytm, PayU India, Oxigen to function as a consumer bill payment platform; guidelines  to regulate P2P lending platforms; favouring towards easier exit policy for startups etc.

In August 2016, the RBI also launched a website called Sachet, to further its efforts to curb illegal and unauthorised pooling of funds by unscrupulous firms. In October 2016, RBI drafted a new regulatory framework to manage investments in foreign technology funds by Indian parties that utilise the money in startups abroad. Earlier last month, it also doubled the balance limit that can be kept in prepaid wallets and cards to INR 20,000, to support small merchants to facilitate and receive payments electronically.