Your card-related retail transactions will soon become safer. Alarmed by the increase in card-related fauds, the Reserve Bank of India (RBI) last week suggested the industry shifts to chip-based cards as against the more commonly used magnetic strip ones.
Chip-based cards come with encrypted information, which makes then safer. But, the apex bank wants new credit and debit cards to provide greater security by asking for a second-level authentication by way of a personal identification number (PIN ).
Most credit and debit card frauds take place at point of sales (PoS) terminals. According to RBI’s report, the banking industry saw frauds worth Rs 13 crore due to lost, stolen and counterfeited cards in 2010-2011. At Rs 8.2 crore, loss due to counterfeited cards was the highest.
Currently, all transaction data from the PoS terminals or automated teller machines (ATMs) to the host system are sent in a clear text format. The transaction data travels through public-switched telephone networks and General Packet Radio Service (GPRS). Any data compromise, due to wire tapping at the merchant establishment or during the communication carriage can lead to fraud. Fraudsters who get hold of a card can copy the information in case of magnetic stripe cards. However, this is not possible with chip-based ones.
There are around 240 million debit cards and around 18 million credit cards. The total spending at PoS terminals is worth Rs 88,000 crore. According to RBI, the number of such terminals in the country is about 5.6 lakh. There are around 70,000 ATMs.
Bankers say though the move is expected to bring the level of card frauds down, it will increase the cost for banks, which means the cardholders will have to shell out more money for the card. Presently, chip-based cards cost around Rs 80-90, as against Rs 15-20 for magnetic strip cards.
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This will also increase the time taken for retail transactions at PoS terminals because of the second level authentication needed.
If chip-based cards with PIN are to be mandated for all transactions, the PoS terminals will also have to be modified to read the new type of card code. In its report, the panel says if the service code on the card does not support the PIN, the terminals will have to be updated with bank identification numbers of all the issuing banks in the country.
Banks like State Bank of India (SBI), ICICI Bank, Citibank and HDFC Bank have started replacing plain magnetic swipe high-end cards with dual cards having both the chip and the magnetic swipe.
The RBI panel has also suggested that an alternative to PIN, which is used for ATM for cash withdrawals, could be a biometric verification, using data from the Unique Identification Authority of India’s ‘Aadhar’ number.