Wednesday, July 31, 2013

Aadhaar, RuPay Card, chip & pin need to coexist

The National Payments Corporation of India (NPCI) is emerging as the infrastructure provider for the banking system. Its entry has enabled bank accountholders free usage of any ATM in the country. Its Rupay card promises to save the country foreign exchange paid out to multinational giants as service charges for card payments. It is also providing the technology backbone for direct cash transfer which will replace government subsidies. In an interview with TOI, NPCI MD & CEO A P Hota speaks of how the payment landscape will evolve.

What is the progress on Rupay—India's domestic card payment system? How does it compare with China Union Pay?

Our main achievement is that we are "cardifying" customers of those banks who have never seen a card. Until Rupay came hardly 50-60 banks were issuing cards. Now the number of banks issuing cards is 106. We plan to reach out to 500 to 600 banks in a year for issuance of cards. Out of 58 rural banks, 50 have started issuing Rupay cards which can be used in any ATM or for retail payments and ecommerce.


Where will the cards be accepted?

Of the 9 lakh point of sales (POS) terminals, 2.10 lakh are active on Rupay. Three banks—HDFC Bank, ICICI Merchant Services and Axis Bank—account for 80% of POS terminals in the country. We are talking to all three. We expect that 90% of the terminals would be active by September-end. Among public sector banks, SBI is the largest and we have already activated 85,000 of their POS machines. In e-commerce, we have made a beginning by tying up two banks out of 17. We are targeting the remaining. There are about 12,000 merchants in online space and we are working to get them to accept Rupay. Merchants will have to make a small change of providing one more link to Rupay payments.

There has been some hype over the 1.4 million Aadhaar-based micro ATMs? Who will set them up?
This 1.4 million number has been arrived at by calculating two terminals per village for each of the six lakh villages in the country and remaining two lakhs for the cities. The micro ATMs are similar to point of sales terminals with biometric authentication. Under the UIDAI scheme, banks would be reimbursed cost of the terminals to the extent of Rs 15,000 the moment they reach 2000 transactions. The financial support is linked with the volume of transactions. Nabard has said that it will provide Rs 25,000 per terminal if they are set up by rural banks. Regional rural banks (RRBs) are dependent on sponsor public sector banks. This gives an opportunity to PSU banks to leverage RRBs to reach out to rural areas for financial inclusion.

There seems to be some debate over whether cards should have chip-and-pin based authentication or Aadhaar-based biometric authentication?
It is not debate between Aadhaar and chip and pin. The market is very large and the potential of Aadhaar is in taking needs of another segment. If everyone has to move to cashless transaction in a secure mode that will need the coexistence of both. As against average cost of Rs 20 for a magnetic stripe card, the cost is around Rs 80 for a chip card. For financial inclusion, Aadhar is a better option because in villages maintaining the confidentiality of PIN is difficult as this would require a certain degree of understanding of the risk associated with it.

There have been a number of frauds in ATMs of late. As their network provider what are you doing to cut frauds?
We are asking banks to go in for fraud-risk mitigation (FRM) system. FRM system is a neural system that can identify suspect transactions. RBI has also recommended that banks should put in closed circuit cameras in all ATM locations. But because cloning has become so easy, sooner or later the country will have to migrate to a chip and pin or Aadhar based authentication.

There are over 5 crore accountholders registered for IMPS (instant mobile-based payment service). When will the usage take off?
If IMPS has to cover everybody it is possible only if usage goes beyond those with smartphones. It needs to cover Rs 1,000 handsets as well. For such handsets, the only option is SMS or USSD. But SMS is unsecure as the PIN is exposed so the best system is a server-based one. So USSD is the answer. But this requires partnership with telecom companies. The telcos want bank to pay charges on behalf of customers, but if banks do this tomorrow there may be a demand from customers that bank pay data charges for mobile and internet.

NPCI launches chip-based debit cards for improved security

With the aim of providing better security to card holders, payment service provider National Payments Corporation of India (NPCI) has rolled out chip-based debit cards under the RuPay brand.
The chip card has to be inserted into the machine so that the user can key in a unique PIN to complete the transaction, which enhances the security level. The chip cards are based on international specifications that provide protection to banks and customers against card skimming and counterfeiting frauds, NPCI said in a statement.
Bank of Baroda and Saraswat Co-operative Bank are the first two banks to issue these cards. 

The card will be accepted at all channels including ATMs, point of sales (PoS) machines, e-commerce and now EMV (card standard developed by Europay, MasterCard and VISA) chip and pin cards across the globe. 

A. P. Hota, Managing Director and CEO, NPCI, says, “RuPay, a benchmark card scheme of NPCI, offers both modes of chip card — full EMV issuance and quick EMV issuance that will offer all the safety measures required of a next-generation card payment system.” 

Most banks are likely to opt for Quick EMV issuance of the RuPay card as there is no additional fee prescribed in it and also to meet the deadline of November 30 as prescribed by the Reserve Bank of India, to be issued by banks to all customers opting for international cards. Additionally, the Quick EMV option requires minimal changes at the banks’ host system to be borne by lower cost. Whereas, full EMV issuance entails higher cost and a much longer time, the company said.

Monday, July 15, 2013

Co-operative banks may get a breather in Rupay Card launch

Cooperative banks are likely to get more time to comply with the new regulations of Reserve Bank of India (RBI) on banking operations as neither the Central government nor the regulatory bank has completed the preparations to switch over to the new payment regime.

The RBI had set June 30 as the deadline for cooperative banks to abide by a four per cent capital adequacy norms and insisted that cooperative banks should make agriculture lending through RuPay cards. The RuPay-enabled credit card is the Indian domestic card payment network set up by the National Payment Corporation of India. The RBI had said that core banking solutions should be introduced in the primary cooperative banks through the District Cooperative Banks and agriculture lending should be routed through RuPay cards. On insisting to ensure four per cent capital adequacy, the banks will have to maintain a capital of Rs.4 for every Rs.100 lent. This was proposed to be progressively increased to seven per cent by 2014 and nine per cent by 2015. Non-compliance would have lead a total freeze on the banking operations and agriculture lending would have been the first casualty.

Banking sector sources told The Hindu here that neither the Centre nor the RBI had issued any instruction so far on the action to be initiated against the banks which had not moved over to the proposed payment system. This was mainly on account of the delay in distributing the RuPay cards and also completing the work on core banking solutions. It may take at least a year to complete such procedures and the cooperative sector would get a breather till then.

The distribution of Kisan Credit Cards (KCCs) had also not made much headway in the State since September last. As per the statistics available on September 30 last, 6,94,406 cards were distributed through cooperative banks and 1,49,279 cards through Regional Rural Banks. 

When compared to other States, Kerala has a unique cooperative movement with a strong network of 1,603 primary banks and 14 district banks that come under the apex State Cooperative Bank with deposits to the tune of Rs.82,000 crore. A lion’s share of the deposits, roughly about Rs.60,000 crore, have been mobilised by the primary banks which cater to the primary financial needs of small, medium, and marginal farmers as well as traders and others at the grass-roots level.

Kerala will thus perhaps be the only State to be hit hard by the guidelines. But it may not be able to garner the support of other States to mount pressure on the Centre for an exemption from the regulator bank, sources said.

Vijaya Bank promotes RuPay-branded debit cards in Gujarat

Vijaya Bank has enabled its merchant terminals for usage of RuPay-branded debit cards in Gujarat, urging customers to make use of the new indigenous payment facility.

A function was held at its Regional Head Office here to enable merchant terminals in the use of RuPay-branded debit cards. 

Ajay Kumar Khurana, Regional Manager, said with the enabling of the bank’s ATMs and POS terminals for the RuPay brand, Vijaya Bank has joined the league of banks whose payment and settlement systems for domestic card transactions are settled within the country. 

RuPay is an indigenous payment and settlement system that was developed by the National Payments Corporation of India (NPCI) in October. 

So far, Vijaya Bank has issued two variants of the card, i.e. RuPay debit card for financial inclusion projects and general customers and Kisan debit cards for the farming community. 

Till now, the usage of RuPay cards was restricted to ATMs. With the activation of the bank’s POS terminals with the RuPay brand, RuPay card usage has been extended to ME terminals. Apart from payment services on the card, NPCI is supporting banks in India for other alternate delivery channels such as mobile banking, IMPS, cheque truncation and NEFT/RTGS services. 

Vijaya Bank Chairman and Managing Director H. S. Upendra Kamath launched the RuPay debit card in Bangalore last week in the presence of NPCI CEO A. P. Hota, the release added.