New rules for verification of digital payments on cards
The Reserve Bank of India (RBI) proposed to adopt a principle-based framework for authentication of digital payment transactions to promote alternative mechanisms other than the popular SMS-based One Time Passwords (OTP).
Speaking during the monetary policy statement address, RBI Governor Shaktikanta Das said although the central bank had not specified any particular Additional Factor of Authentication (AFA) mechanism, SMS-based OTP has become very popular.
However, in recent years, with technological advancements, alternative authentication mechanisms have emerged and in order to aid in their adoption, RBI has proposed to constitute a principle-based framework for the same, he said.
“Therefore, to facilitate adoption of alternative authentication mechanisms for enhancing the security of digital payments, it is proposed to put in place a principle-based framework for authentication of such transactions,” Das said.
The central bank also suggested streamlining the “onboard process” of Aadhaar Enabled Payment System (AePS) service providers and called for introduction of additional fraud risk management measures which will strengthen the security of the system while enhancing its robustness.
According to RBI, in 2023, more than 37 crore users undertook AePS transactions, highlighting the importance played by the segment in financial inclusion.
“To enhance the security of AePS transactions, it is proposed to streamline the onboard process, including mandatory due diligence, for AePS touchpoint operators, to be followed by banks. Additional fraud risk management requirements will also be considered,” RBI said in a statement.
The banking regulator said that the instructions regarding AePS will be issued shortly. Both these measures are expected to help in controlling the frauds in the system.
“The new framework for digital payment authentication together with more stringent due diligence requirements for Aadhar Enabled Payment Systems will help curtail fraud risk,” said Zarin Daruwala, Cluster CEO, India and South Asia markets (Bangladesh, Nepal and Sri Lanka), Standard Chartered Bank.
