Wallet players have approached the National Payments Corporation (NPCI) to build a database which assesses the risk of fraudulent transactions . The development was first reported by the Economic Times.

There have been an increased instances of fraud where money would be siphoned from bank accounts and loaded into wallets. The money then gets credited into the fraudster’s bank account, which causes a break in the digital trail. MediaNama had reported that State Bank of India (SBI), the country’s largest lender, removed  the option of loading money on all major wallets through net banking due to such frauds.

The database will get an alert once a wallet receives a complaint or finds a transaction suspicious and will have other informaton such as the bank account used and location. The database will then alert other wallets to block the bank account and stop further transactions. The ET report added that the NPCI needs regulatory clearance from the Reserve Bank of India (RBI) to set up such a system.

Note that SBI said it was conversation with many of the wallet players who need to meet a few conditions for the bank to open net banking as mode of loading money. One of the conditions was that there needs to be a buffer when a wallet transfers money to a bank account.

RBI looking to cap liability in online fraud

The RBI is looking to cap customer’s liability in the event of online fraud, deputy governor SS Mundra said at an even in May. However, he did not elaborate on the RBI’s plans. Earlier in May, minister of state for finance Jayant Sinha said that the RBI is working on a regulatory mechanism for customers to address customer grievance and liability issues arising out of frauds in electronic transactions.

Rise in card frauds

With more payments going digital, globally,  there has been increase in card-not-present (CNP) fraud as indicated this white paper (PDF) by the Smart Card Alliance Payments Council. The modus operandi of the fraudulent transactions are usually done on online shopping websites which are CNP transactions. In an incident in October 2015, Kotak Mahindra Bank detected a credit card fraud to the tune of Rs 2.84 crore which involved 1730 transactions carried out on 580 cards. The fraud was carried out by fabricating the cards and used for online shopping and making payments in seven countries – Canada, USA, UK, Germany, Brazil, France and India.