ICICI-DEBIT

The Reserve Bank of India (RBI) has eased the norms for payments made using NFC-based or contactless cards and said that transactions below Rs 2,000 will not need a additional factor of authentication. The additional factor of authentication the RBI had earlier mandated was entering a PIN or an one-time password.

” Of late, the Reserve Bank has been receiving requests from customers and entities in certain niche segments indicating the need to foster innovative payment products / processes and for enhancing the convenience factor in certain use cases / type of transactions without the need for having the mandatory additional factor of authentication (AFA).  The requests have been examined from the perspective of the trade-off between security and convenience in card transactions and need for relaxation in extant instructions with suitable safeguards to protect customer interest in light of availability of new technologies. One such technology is that of Near Field Communication (NFC) which is used in contactless cards, ”  the RBI said in a release.

So far only ICICI Bank has rolled out NFC-based cards in the market while the country’s largest lender State Bank of India (SBI) has announced its plans for the same. It’s worth nothing that way back in 2011, SBI had introduced contactless debit cards that doubled up as travel smart cards, enabling Bangalore commuters to pay for their journeys on the metro with a simple tap.

However, the RBI has maintained that two-factor authentication will still be in effect for ATM transactions and card not present transactions. Card not present transactions are those where a cardholder cannot present his or her card to the merchant to physically verify a debit and credit card.

What the RBI needs to address

It’s great the RBI finds NFC technology provides security as well as convenience, but it has not addressed the untapped potential of the technology which lies in mobile phones. Most smartphones of the day are NFC enabled or can be enabled by sticking an NFC tag. Maybe some clarity on how NFC-based wallets in the country can operate can could help spur the growth of NFC-based wallet systems.

Another point for NFC-based cards which will affect its adoption is the number of point of sale (POS) terminals which can handle NFC cards. So far ICICI Bank has said that it has deployed over 1,200 Electronic Data Capture (EDC) machines capable of accepting contactless payments. But that number is still woefully low and NFC cards’ adoption will be in the hands of merchants who set up more POS terminals which can accept contactless payments.