Finally, RBI Allows Single Factor Authentication Regime For Transactions Upto INR 2000

With an aim to promote ‘tap and pay’ electronic payments, the Reserve Bank of India (RBI) has finally allowed customers to transact with contactless card upto INR 2000 without punching a separate PIN for authentication.

It means that now additional factor authentication is not required upto INR 2000 per transaction and a customer can now just wave the card before the PoS machines to complete the transaction.

Besides, the RBI has said that banks should give customers a choice to set a limit lower than INR 2000 per transaction and issuing bank will be responsible for authorising the contactless payment based on such card-based limits.

The move is likely to speed up acceptance of ‘tap and pay’ electronic payments at retail outlets, in transport services and for toll payments. The ‘tap and pay’ refers to the use of near-field communication (NFC) technology, enabling users to make payments by waving or tapping the card near the contactless reader instead of swiping it.

The RBI has advised banks to explain to customers the NFC technology, its use, risks and also the maximum liability devolving on the customer, and also to put in place a robust mechanism to report of loss or stealing of cards.

In addition, it has asked banks to conduct velocity checks to decide on how many such small value transactions could be allowed in a day or a week or a month.

However, as per the preconditions set out by RBI, the contactless card should also incorporate the latest EMV Chip technology for enabling payment beyond INR 2,000. Banks must also give customers the option to choose to pay using the regular swipe method without using NFC irrespective of the amount involved.

Prior to this, the customers had to key-in the personal identification number (PIN) for authenticating every transaction to avoid any chances of fraud.

Earlier, RBI in its draft circular said, “It has been decided to relax the extant instructions relating to the need for additional factor of authentication requirements for small value card present transactions only using contact-less card payments using NFC.”

It is to be noted that the ecommerce firms have been pitching for doing away with the two-factor authentication for small value transactions, and even the homegrown online marketplace, Snapdeal had also requested for the cap to be set at INR 3,000.