Showing posts with label National Payments Corporation of India (NPCI). Show all posts
Showing posts with label National Payments Corporation of India (NPCI). Show all posts

Monday, September 22, 2014

'Jan Dhan' Scheme: National Payment Corp Scrambles to Issue RuPay Cards

'Jan Dhan' Scheme: National Payment Corp Scrambles to Issue RuPay CardsAlthough close to 4 crore bank accounts have been opened under the Jan Dhan Yojana so far, there is a huge backlog in the issuance of the Rupay cards by the National Payment Corporation of India (NPCI), the sole issuer of ATM cards for these new accounts.

Over the weekend, Financial Services Secretary G S Sandhu had said that banks had opened 4 crore accounts so far and mobilised about Rs. 3,700 crore as deposits in these accounts.

"Although the number of accounts opened are very high, about 20 lakh (RuPay) cards have been issued so far," National Payment Corporation of India (NPCI) managing director and chief executive A P Hota told PTI.

There is a lag in production of cards which usually requires three weeks to get cleared, according to Mr Hota.

"Personalisation (of cards) takes time because the name has to be embossed on the card. This is such a big order coming all of a sudden. Nobody expected that in one go so many accounts will be opened," he said.

However, he said the backlogs are likely to be cleared in next three weeks.

The scheme was launched by Prime Minister Narendra Modi on August 28 with an aim to boost financial inclusion.

Under the Jan Dhan scheme, account holders will get an overdraft facility of Rs. 5,000. They would also be provided with RuPay debit cards and Rs. 1 lakh accident insurance cover.
The government has envisaged to provide bank accounts to 7.5 crore people by January 26.

Nabard to highlight co-op role in RuPay implementation

The initiative of South Canara District Central Cooperative (SCDCC) Bank Ltd to make primary agricultural cooperative societies (PACS) as part of the payment system under the RuPay Kisan credit card will be taken as a model by Nabard.

GR Chintala, Chief General Manager of Nabard, Bangalore, told Business Line here on Saturday that the Nabard will issue a circular in this regard in another one-and-half months. 

The initiatives of Raigad and Rampur district central cooperative banks in Maharashtra and Uttar Pradesh, respectively, will also be showcased as models. Highlighting the SCDCC Bank model, he said both the tiers of cooperative banking have retained their identity while implementing RuPay cards. 

Here PACS, under SCDCC Bank’s jurisdiction, directly give loans to farmers. For the implementation of RuPay card, these societies open accounts in the books of SCDCC Bank.
Though the accounts are maintained at SCDCC Bank, the funds are routed in such a way that the farmer need not approach the SCDCC Bank branch. He said that the farmer will continue to transact at the micro ATMs at PACS level. 

In Raigad, farmers are the members of PACS but they have their loan accounts at the branches of DCCB (district central cooperative bank). All the accounts are transacted through the DCCB in Raigad. 

The Raigad model will be suited for those districts where the loans to farmers are extended directly through DCCB branches. 

Those districts that follow the practice of extending loans to farmers through PACS can study the SCDCC Bank model. 

He said that 167 PACS come under SCDCC Bank. It has jurisdiction over the revenue districts of Dakshina Kannada and Udupi. The boards of 163 PACS have given their nod for being a part of the implementation of RuPay Kisan credit cards to farmers.

Monday, September 8, 2014

Jan Dhan Yojana opens a new door for RuPay gateway

 

As Pradhan Mantri Jan-Dhan Yojana (PMJDY), the financial inclusion scheme launched by Prime Minister Narendra Modi late last month notches up impressive numbers and expects to meet its 7.5 crore accounts target well within 100 days, payment gateway RuPay is experiencing a boost in fortunes. 

Payment gateways are platforms that help banks facilitate electronic money transfers. India is only the fourth country in the world after the US, Japan and China to have its own national payment gateway, in RuPay. 

With the PMJDY getting nearly 2.5 crore new bank accounts within seven days of launch, each account holder gets a RuPay debit card along with his/her account.As a result, RuPay is notching up numbers. 

Fast-growing base

According to the National Payments Corporation of India (NPCI), which developed the platform, the RuPay card has a current base of 2.5 crore users and is seeing about seven lakh inter-bank transactions a day. 

With the financial inclusion scheme coming into play, the total number of RuPay card holders is likely to surge. NPCI will declare official numbers at the end of this quarter. 

AP Hota, Managing Director and CEO of National Payments Corporation of India Ltd (NPCI), told BusinessLine that the target for the year-end was six crore cards. By March 2015, RuPay may be able to add an additional 10 crore accounts. If the Centre’s financial inclusion scheme lives up to its hype, the sheer number of RuPay cards in the country will create a critical mass that will help create a huge network of retailers who accept RuPay cards. According to Reserve Bank of India statistics, the total number of credit cards in India is currently at around 1.9 crore while the number of debit cards issued is at 40 crore. Currently, global organisations such as Visa and MasterCard dominate this space. But Hota says competing with MasterCard and Visa is not a priority. “The perceived competition with MasterCard and Visa is not relevant at this stage. They are global companies with trillion-dollar revenues and deep pockets. We are a small company with ₹100-crore capital,” he said. 

Main challenges
The main challenges for RuPay are to get acceptance among the high-income bracket and to increase the number of transactions among those in the lower income bracket. Partner banks have an incentive to push RuPay to customers as transaction costs through this gateway are expected to be at least 40 per cent lower than through Visa and MasterCard.

Monday, September 1, 2014

Jan Dhan Yojana: Many questions remain

The government's financial inclusion scheme, Pradhan Mantri Jan Dhan Yojana, is an empty shell at the moment. The government heralded its achievement of clocking 15 million new bank accounts under the scheme by Thursday and looked ahead to the target of achieving 75 million accounts by January 2015.

In fact, given that the UPA government added an additional 60.9 million accounts in 2013-14, the target is an easy one. The real challenge is of keeping the accounts alive, funding the overdraft mechanism and ensuring confusion over the insurance cover is resolved.

A meeting on Monday in the finance ministry could  resolve some of the make-or-break problems of the grand scheme. The finance ministry will try to resolve the confusion created over the account-linked accident insurance the government has already announced. Other components of the Jan Dhan scheme too are yet to be fleshed out. Each of the new bank accounts is to come with a RuPay debit card, a Rs 5,000 overdraft facility, a Rs 1 lakh accident insurance and Rs 30,000 life insurance. Keeping these accounts running, the insurance-claim system functional, funnelling money through cash transfer mechanisms and making the overdraft facilities financially viable will imply costs for different financial sector actors. Or, more likely, for these costs to be subsidised by the government.

PROBLEM AREAS
  • Accident insurance cover Meeting on Monday to resolve confusion
  • Funding the banking correspondent model finance unclear. 248,000 correspondent agents in country
  • Cost of overdraft facility No clarity on who shall bear the cost
  • Existing saving accounts without RuPay card not to get other benefits
  • Creating new accounts not a challenge, increasing transaction per account is

k done earlier for the direct benefit transfer and financial inclusion schemes. But this is really several schemes rolled into one over phases and we will have to sort the fine details," said a senior official in the government.

The immediate challenge for the government will be to figure out the financial viability of maintaining the accounts and the linked insurance schemes. The RBI-promoted National Payments Corporation of India (NPCI) which offers the RuPay card, had already given the contract for accident insurance to HDFC Ergo for a period of three years. But this insurance was linked to the transaction history of the accountholder. The industry was led to believe there would be an insurance top-up by the government on this of Rs 1 lakh, costing NPCI Rs 1 per customer every year.

NPCI plans the insurance cost from the income generated out of transaction on the RuPay platform.

For every ATM transaction the issuing bank pays NPCI 40 paise. For every point of sale or ecommerce transaction NPCI gets 60 paise from the issuing bank and 30 paise from the accepting bank. All existing RuPay debit card holders would be able to avail of this facility, sources told Business Standard but not those holding saving accounts without the RuPay card. The card itself will cost about Rs 50 each roughly, though the scale could bring down costs marginally, sources said.

A former banker also noted that the financial viability of running these millions of accounts would depend on the minimum balances maintained and the number of transactions carried out in a year. A source in the government said earlier assessments suggested that out of the 180 million bank accounts opened under the financial inclusion scheme so far, a vast majority sat dormant or unused once they were opened. The RBI also noted that even as the volume of accounts had increased substantially keeping the transactions flowing remained a challenge. In other words, the banking inclusion system generated empty accounts to meet set targets.

Friday, August 8, 2014

Not sharing client data, says NPCI

MUMBAI: National Payments Corporation of India - Reserve Bank of India's brainchild which manages the backbone of the country's payments systems - has been asked to pay a token fine of Rs 10,000 to the Maharashtra treasury for passing on highly sensitive personal data to processing companies without a non-disclosure agreement. NPCI has contested the order by the state government's principal secretary (information technology) denying both charges - of compromising individual personal data and of not having non-disclosure agreements.

The adjudicating officer's order was in an intellectual property rights tussle between two companies that processed card transactions for banks. CredenTek Software, an IT company, had complained against In Solutions Global (ISG), which specialized in processing card transactions for banks. NPCI came into the picture as it emerged that it was one of ISG's major clients.

"We had filed a case against In-Solutions Global for source code violation and as part of our evidence we had submitted CDs containing sensitive personal data of bank customers which was handed to our clients by ISG," said Prashant Mali, Cyber Law & Cyber Security Expert from Mumbai who represented CredenTek for this case.


Hearing both sides, the adjudicating officer - Rajesh Aggarwal, principal secretary (information technology) - said in his order that no case is made out of data theft or source code stealing under the IT Act and it is a dispute regarding contracted services not being rendered rather than a copyright issue. While he dismissed the source code, he said that during the course of hearings, "a more sinister crime of negligence under the IT Act came to light" and expressed shock that real data of bank customer transactions was passed on as sample data for testing software rather than simulated data.

When contacted, NPCI said it does not share any confidential information with any party and has strong privacy policy based on international standard and its and has been awarded certificate for this. NPCI said its electronic clearing and settlement system was "safe and highly secure". and was compliant with Payment Card Industry Data Security Standards. NPCI said it has entered into a non-disclosure agreement with In-solutions Group, which has been filed with the application before the IT secretary of the Maharashtra government - the plea has not been disposed of so far.

"The order passed by the IT secretary against NPCI was without jurisdiction and ultra vires and beyond the powers. There was no proceeding initiated by the IT secretary, government of Maharashtra, against NPCI under any law. Even no notice was issued by IT Secretary before issuing order for payment of penalty. NPCI has already challenged his order as soon as it came to knowledge of NPCI by filing an application for review application," it said in a statement.

NPCI, which manages the ATM switch, Rupay and other payment networks such as IMPS that allow electronic funds transfers between banks, has been upset at the strong remarks made by the adjudicating officer without being heard. In the order, the adjudicating offer had said what was "more worrisome" was that NPCI is also running the Aadhaar Payment Bridge System, which includes Aadhaar number (UID) of the customers. Now, UID number is perhaps the most sensitive data of an Indian citizen, which needs to be protected even more than the Social Security Number (SSN) of USA, as it has linkage to biometrics (fingerprints and Iris). Obviously, UID number cannot be published on any website by any government department, and should be used for any Analytics or any other purpose, only with proper precautions as per Rules 6 and 7 of Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011."

Monday, July 7, 2014

Government asks PSU banks to issue RuPay debit cards to customers, install POS terminals



For the first time in their 30-year existence, Visa and MasterCard, the world's largest payment companies, are facing the heat in India. Lending its weight behind the local card scheme, RuPay, the government has asked state-owned banks to issue RuPay debit cards to customers.

In a communique to banks last week, Gurdial Singh Sandhu, secretary at the finance ministry's department of financial services, "urged" CEOs of public sector banks to issue RuPay cards to all existing customers who do not have debit cards as well as to new clients. Banks have also been told to "encourage" merchant establishments to install point of sale terminals for RuPay cards, two banking sources told ET.

While banks have not been instructed to refrain from issuing cards where transactions are processed by Visa or MasterCard, there is a clear direction to promote RuPay. Customers are typically issued a single debit card per account and banks will have to pursue the unconventional practice and possibly tweak systems to issue two debit cards to a client who insists on a Visa or MasterCard that currently have greater acceptance than RuPay.

RuPay was launched by National Payments Corp of India (NPCI), set up to function as a cost-effective payment services entity. Responding to ET's query on whether PSU banks could lose rich and more brand-conscious customers to private banks (which have not received a similar direction from the finance ministry), AP Hota, MD & CEO of NPCI, said, "Such fears are unfounded. RuPay is a fully functional card payment system. We are also launching Platinum cards for HNI customers."



 "I'm not aware of the ministry's communication to banks. But as I understand, the government's focus is to promote financial inclusion," said Hota of NPCI.

For banks, it's a mandate they will have to fulfil. Within the next six months they will have to offer the new debit card to existing customers, inform thousands of branches and submit progress report to the ministry every quarter.

It's not unusual for countries and governments to support local retail payment networks that offer the software backbone and process card transactions. Countries such as Singapore and Brazil have their local payment companies while China disallows foreign payment firms to process domestic card transactions. But industry sources said an absence of a level playing field may worry global players such as Visa and MasterCard.

For MNC payment firms, the stakes are high. Every year around Rs 80,000 crore worth of debit card spends happen in India, of which 5% are cross-border transactions. It's a market that's growing at close to 35% annually. Credit card transactions, growing at over 25%, are more than two times debit card spends.

Asked whether RuPay would be accepted for transactions such as buying books and music on international e-commerce sites, Hota said NPCI was tying up with the US firm Discover Financial Services to promote co-branded cards to facilitate international transactions.


The fledging card scheme is trying to spread its footprint. So far,A 20 million cards have been issued. "It has full acceptance in ATMs, and of the 10.35 lakh POS (point of sale) terminals in the country, RuPay can be accepted in 9.87 lakh terminals. About 95% of debit card transactions are domestic in nature," said SK Gupta, chief project officer, RuPay. But not all merchant establishments are familiar with RuPay and few display RuPay stickers (along with Visa and MasterCard) on their counters. Till now, POS transactions worth Rs 40 crore have happened through RuPay.

Wednesday, May 14, 2014

With RuPay, India builds its own card payment network

President Pranab Mukherjee presenting an award to CEO, ICICI Bank Ltd. Chanda Kochhar during the launch of "RuPay" card in New Delhi on Thursday.

India takes on global players like MasterCard and Visa; Conceived by National Payments Corporation of India, RuPay card is accepted at all ATMs (1.6 lakh plus), 95% of PoS terminals (9.45 lakh plus) and most of the eComm merchants (about 10,000) in the country

New Delhi : President Pranab Mukherjee on Thursday dedicated to the nation indigenous card payment network called RuPay taking on the global players like Visa and MasterCard. It will work on ATMs and merchant outlets and help in reducing cash transactions.

The new payment network developed by the National Payments Corporation of India (NPCI), a not-for-profit company envisioned by the Reserve Bank of India (RBI) and created by the banking industry, covers all the automated teller machines (ATMs) and most of the retail and e-commerce platforms.

The RuPay platform is being used by certain banks like ICICI, State Bank of India, Punjab National Bank, among others, for clearing and settlement. RuPay, which works on three channels — ATMs, Point of Sales (POS) and online sales, is the seventh such payment gateway in the world.  A variant of pre-paid RuPay card would shortly be launched by IRCTC, which will help in booking railway tickets.

“RuPay” is the coinage of two terms Rupee and Payment.  “Dedication of RuPay to the nation is symbolic of the maturity of the payment system development in India,” Mukherjee said after formally launching the card at a function at Rashtrapati Bhavan.  He pointed out that with the launch of new system, India has now ranked among the “few countries in the world to have such a network built domestically to meet the card-based payment system needs of the country.”

The RuPay card is accepted at all ATMs (1.6 lakh plus), 95 per cent of PoS terminals (9.45 lakh plus) and most of the eCom merchants (about 10,000) in the country.

RuPay Scheme provides flexibility to card issuing banks to issue special purpose cards like Kisan Cards, Milk Procurement Cards, Grain Procurement Cards and Financial Inclusion Cards.

A variant of the card called “Kisan Card is now being issued by all the Public Sector banks in addition to the mainstream debit card which has been issued by 43 banks”.   More than 150 cooperative banks and the Regional Rural Banks (RRBs) in the country have also issued RuPay ATM cards. The total number of cards issued as on date is 17 Million and is growing at a rate of about three million per month.

NPCI Chairman Balachandran M said the NPCI board plans to take RuPay card overseas and is already in talks with Discover Financial Services in the US and JDC in Japan for partnership.
Speaking on the occasion, Financial Services Secretary G S Sandhu said RuPay would be available at a cost which is much less than those of international cards.

For clearing and settlement of each transactions, banks will have to pay 40 per cent lower fees in RuPay platform compared to other international platforms. Public sector banks have already installed 25,331 RuPay cards enabled ATMS and 9,000 more ATMs would be installed in the current fiscal, Sandhu said.

Monday, May 12, 2014

RuPay will reduce dependence on cash transactions: Pranab Mukherjee

Dedicating 'RuPay' card to the nation, Mukherjee said for a large country like India, volume of card transactions will be significant in the years ahead.

Dedicating 'RuPay' card to the nation, Mukherjee said for a large country like India, volume of card transactions will be significant in the years ahead. 

NEW DELHI: President Pranab Mukherjee said 'RuPay'-- India's payment gateway -- will reduce dependence on cash and help in streamlining the card payment systems in the country.

Dedicating 'RuPay' card to the nation, Mukherjee said for a large country like India volume of card transactions will be significant in the years ahead.

RuPay will not only reduce dependence on cash, but will offer users diverse set of payment option within the country, he said, adding India is one of the few countries in the world to meet the card payment system needs domestically.

A variant of pre-paid RuPay card would shortly be launched by IRCTC, which will help in booking railway tickets. RuPay is developed by National Payments Corporation of India (NPCI) and would be the seventh such payment gateway in the world.

NPCI Chairman Balachandran M said the NPCI board plans to take RuPay card overseas and is already in talks with Discover Financial Services in the US and JDC in Japan for a collaboration.

RuPay works on three channels - ATMs, Point of Sales (POS) and online sales. Speaking on the occasion, Financial Services Secretary G S Sandhu said RuPay would be available at a cost which is much less than the cost of international cards.

The public sector banks have already installed 25,331 RuPay cards enabled ATMS and 9,000 more ATMs would be installed in the current fiscal, Sandhu said. The RuPay card is accepted at all ATMs (1.6 lakh plus), 95 per cent of PoS terminals (9.45 lakh plus) and most of the eCom merchants (about 10,000) in the country.

Since the transaction processing will happen domestically, it is expected to lead to lower cost of clearing and settlement. Banks Will pay fees in Indian rupees instead of foreign currency.

A variant of the card called 'Kisan Card' is now being issued by all the public sector banks in addition to the mainstream debit card which has been issued by 43 banks. Further, a separate card for payment of milk purchases has also been launched.

The total number of banks issuing RuPay cards is now more than 250 and the card base as on April was at 20 million plus. More than 150 cooperative banks and the regional rural banks (RRBs) have also issued RuPay ATM card.

RuPay, a new card payment scheme, is the coinage of two terms Rupee and Payment. RuPay card offers personal accident insurance and permanent disability cover of Rs one lakh to the cardholder, subject to the card being kept in activated condition.

Such a feature is not present on any international card scheme, a statement said.

Thursday, April 24, 2014

NPCI Launches RuPay PaySecure, an e-commerce Solution



National Payments Corporation of India (NPCI), the umbrella organization of all retail payment systems in India, today announced the much-anticipated RuPay PaySecure e-commerce solution at an inaugural event in Mumbai.
“The launch of PaySecure with RuPay in India, Acculynk is well on its way to becoming the first global debit authentication network, bringing together debit cardholding consumers from across the globe to merchants”
RuPay PaySecure solution, which is devoted to serve the citizens of India with exceptional and user-friendly features, was launched by Shri H. R. Khan, Deputy Governor of Reserve Bank of India (RBI), in the presence of Indian banking stalwarts.

With the RuPay PaySecure solution, anyone having RuPay cards can make online payments to fulfill various need-based services such as reservations, booking, ticketing, shopping, utility bill payments in a secured manner.

Bank of Baroda, Union bank of India and Kotak Mahindra Bank are first to join as acquirers whereas Bank of Baroda, Union Bank of India and Bank of India have become issuers. State Bank of India and HDFC Bank will soon join the bandwagon.

Speaking at the launch, Shri A. P. Hota, Managing Director & CEO, NPCI, said, “Enabling the RuPay card for online transaction through the PaySecure solution will positively impact e-commerce growth in India and be positive for issuers, merchants and consumers. With this launch, NPCI is one step closer to fulfilling the vision of bringing millions of RuPay cardholders to e-commerce.”

“The launch of PaySecure with RuPay in India, Acculynk is well on its way to becoming the first global debit authentication network, bringing together debit cardholding consumers from across the globe to merchants,” said Ashish Bahl, CEO, Acculynk. “Our ability to bring millions and frankly billions of new consumers from debit centric markets to U.S. merchants with a single PaySecure implementation is a game changer for e-commerce.”

NPCI’s RuPay PaySecure solution has integrated with 100-plus merchant websites across multiple categories that would accept RuPay card for online payment services. NPCI is aiming to cover 100% of e-commerce market by this year-end, for which, significant efforts are being made consistently.

RuPay PaySecure conforms to the RBI mandate of two factor authentication- firstly, it uses two security parameters to authenticate a customer and authorize transaction through the participating banks, and secondly, the solution uses ‘image selection’ for ensuring additional security of every single transaction. This innovative authentication methodology simplifies and improves the existing e-commerce experience of the cardholder as they don’t need to remember complicated passwords or suffer through transaction drops or time-outs, thus making the service more user-friendly and quicker.

NPCI has partnered with US-based online security specialized firm Acculynk to integrate to Acculynk’s patented technology that will address the critical internet based frauds targeted at banks and their customers such as – cyber-attack mechanisms like phishing, key-logging, and spyware/malware. NPCI will address these issues with effective visual security checks such as bank card themed PIN pad, mouse click data entry, customer’s personalized parameters and more.
Enablement of RuPay debit card, India’s domestic card, for e-commerce is a big step towards online payment revolution. RuPay cards issuance has grown to over 3 million in just one year ever since it has been launched in March 2012, and the numbers are adding up. RuPay debit cards are being issued by 20 commercial banks, 32 Regional Rural Banks and over 75 co-operative banks.

At the end of April 2013, more than 336 million bank customers were issued debit cards growing at compound annual rate of 18 percent with the number of credit cards in the market under 20 million, growing at between six and seven percent. The Internet and Mobile Association of India estimates India has 52 million active Internet users and 40 percent of them have shopped online. The introduction of RuPay as an online payment method is expected to contribute to a substantial increase in the number of active online shoppers.

About NPCI
National Payments Corporation of India (NPCI) is the umbrella organization of all retail payment systems in India and is set up by the banks in India with the support and guidance from Indian Banks’ Association. The organization has been mandated to build and operate central infrastructure for payment systems like ATM Switching, Mobile Payments, Cheque Truncation System, POS Switching, 24 * 7 remittance system and Financial Inclusion transactions. The organization has also a mandate to build a domestic card payment scheme.

Friday, March 7, 2014

India's NPCI selects Fime for RuPay certification program


National Payments Corporation of India (NPCI), the umbrella organisation of all retail payment systems in the country, has appointed advanced secure-chip testing provider Fime to deliver its RuPay certification programme.

NPCI will utilise FIME's expertise in setting up EMV-based certification board for its card payment scheme, RuPay.

FIME will define the certification specification, laboratory setup, test plan specification, test tools and operate the certification board for RuPay. FIME will also be involved in setting up the certification process including the associated administrative and business operations. This certification board will be effective from March 2014.

This will ensure all payment cards and point-of-sale terminals deployed under the brand align to the requirements of RuPay specifications. It will also ensure necessary infrastructural alignment of acquirers and issuers with the payment system.

Prakash Sambandam, Director of FIME India says: "Many countries have, or are in the process of migrating to the EMV payment standard. Transitioning to a chip payment infrastructure will take time and require the implementation of new product development cycles. Adhering to RuPay, an EMV payment scheme, will ensure that the products achieve the required functional and security standards and perform as intended, once live in the marketplace. This level of compliance is vital to ensure product interoperability and security optimisation".

In addition to enhanced security, the new payment platform presents opportunities to deliver advanced payment solutions - such as mobile and contactless payments - which are based on secure-chip technology.

Prakash further explains: "The deployment of RuPay, an EMV payments technology in India, will create an international transaction framework which will support India's long-term payment needs. This is an exciting time for payments in India and we are delighted to be performing such an integral role in the evolution of this infrastructure."

Monday, February 17, 2014

Can Aadhaar survive without govt backing? Experts discuss

The key question is, if the next government were not actively back Aadhar, has the system created enough mass of benefits for state governments, banks, and the lay citizen to want the scheme to continue?

The unique identity or the Aadhar was one of the high profile projects of the UPA government. By roping in India's smartest technocrat, Aadhar was the UPA's way of using cutting edge technology to transfer benefits in a corruption free manner. But, after five years of backing, last week the government put on hold its program of paying cash on the basis of Aadhar identity to those entitled to subsidised LPG gas cylinders. LPG was the only instance where Aadhar was used to transfer cash instead of subsidies on a national scale and this discontinuation is a big setback to Aadhar.

But, there are bigger dangers bedevilling Aadhar. The Supreme Court has said Aadhar identity cannot be mandatory to get government benefits. The government in the remaining two weeks won't be able to get a law to mandate Aadhar and worse, the BJP has been saying it prefers the national population register to transfer benefits than Aadhar . The key question is, if the next government were not actively back Aadhar, has the system created enough mass of benefits for state governments, banks, and the lay citizen to want the scheme to continue.

In an interview with CNBC-TV18’s Latha Venkatesh, Sanjay Jaju, IT Secretary of Andhra Pradesh, M Balachandran, Chairman of National Payments Corporation, a company that ensures cheaper payment systems between banks and Govindraj Etiraj, former editor of CNBC-TV18, who has served one year as a volunteer in the UIDAI, share their views on the future of Aadhar.

Below is the verbatim transcript of their interview with CNBC-TV18's Latha Venkatesh
Q: As a leading bureaucrat who has used Aadhar in your state just tell us to what extent is Aadhar important for Andhra Pradesh government to transfer benefits?
Jaju: Andhra Pradesh is one state which has actually completed the enrolment for the entire population. More than eight crore Aadhar numbers have been generated for our state and rest of the numbers are in the pipeline. We have also setup permanent enrolment centers for residents to come and update their Aadhar status or for the residual population to get themselves enrolled.

We are the first state also to start the seeding of various beneficiary databases with Aadhar numbers and we were also the first state possibly to have started the direct benefit transfer (DBT), especially with the LPG, NREGA wages and pensions. We had started to make use of Aadhar as a base for DBT. There were challenges, but I am sure this holds a huge potential and definitely has a future for the country.

Q: To what extent do you use Aadhar?
Balachandran: The day Aadhar became an identity kind of thing, the thought process went to the extent that why not it be linked to the bank accounts, so that any kind of payments that could be made from any source more particularly from government\\'s side could be routed through that number with that as an identification. As far as National Payments Corporation of India (NPCI) is concerned, we are leveraging our national financial switch for routing all the payments which have Aadhar number as an identity. That presupposes seeding of Aadhar numbers in the bank accounts. Today we have about 268 banks wherein this seeding has taken place. We started with a pilot project in Jharkhand in January 2013 and now it has become operational from June 2013.

Q: Approximately how much money or how many transactions? Give me a number as to how many transactions are Aadhar based?
Balachandran: Right now we have about 60 million accounts which have been linked to Aadhar. We have an Aadhar payment bridge as a kind of channel for routing these transactions. Roughly around Rs 2,700 crore have so far been channelized. Every month, in fact in December we had around 11 million transactions routed and January it had gone up to 15 million. What started as a DBT for routing the subsidy for LPG now got expanded to other benefits as well like pension payments, student stipends, so on so forth.

Q: You were telling that it is also getting used by banks for banking correspondence to ensure financial linkages.
Balachandran: Yes, that is another module that we have which is known as Aadhar enabled payment system wherein once the money gets into the accounts of the people either through Aadhar payment bridge or through any other means, now we would like to see that people are able to draw that money through the banking correspondence. For that, we have RuPay as a debit card or ATM card which could be used and the beneficiaries or the account holders go to the banking correspondence.

Q: How widespread is it?
Balachandran: Now around 26 banks have already got themselves enrolled. It is picking up. These people go to the banking correspondence. Use their biometric identification process. Get their account validated through Aadhar number and get the money transferred, that is drawn and even if they have got amounts to be deposited the same system works. Aadhar now as a number identification is used by NPCI.

Q: I get your point that you have been able to have Rs 2,700 crore transferred by the government to intended beneficiaries.
Balachandran: 45 central government and state government departments. 45 departments in the center have been using these kind of accounts.

Q: I want the bigger picture. Where else have you seen the spread of Aadhar?
Etiraj: Aadhar was created for two reasons - one was to give every Indian resident a unique identity, so that is the primary purpose. Of course this identity would be truly portable and mobile which no identity has ever been in this country. Every identity in this country has been linked to either a benefit or an entitlement. Think of the US social security system. It is the only number that you can identify someone with, but it is a benefit or an entitlement that is social security. Similarly in India you have PAN numbers, you have driving licenses, you may have a pension numbers, but it is all a number which is connected to some entitlement or a benefit, so that is the fundamental difference, that this is a unique identity which does not have any property or value attached to it.

The second objective was to make this number truly usable and relevant to people in their daily lives, how do you attach some level of functionality to it. That functionality was authentication, i.e. if I go somewhere and if it is attached or gets connected to some service can I authenticate myself? Once you said authentication there were a host of services which was supposed to be for authentication. What you see as DBT is one such authentication application, the way UID defines it and there are many as Mr. Balachandran himself has pointed out. So that is really the background. It could be to get a telecom card, it could be to even open a bank account which has nothing to do with the transaction. So the whole e-KYC product which UID has launched basically allows people to walk into a branch. There are banks like Axis Bank, Oriental Bank of Commerce (OBC), HDFC Bank, they have all started rolling out. You can go to their branch, authenticate yourself with your biometric and then open a bank account. Earlier opening of bank account meant carrying a whole sheet of papers.
Balachandran: KYC has been a big challenge, yes.
Etiraj: There is authentication. Under authentication comes a whole bunch of applications. Some are to do with delivery of subsidies and benefits. Others are to do with banking. There could be a third element to do with education and a whole bunch of other things which still has to be rolled out as I see it.

Q: In your experience to what extent is Aadhar responsible for the DBT not working, because that was the hue and cry which led to the abandonment of Aadhar being used in DBT?
Jaju: We just heard Mr. Balachandran that more than Rs 2,700 crore have actually being transferred so saying that DBT has not worked will also not be accurate, because amounts have gone. This entire process works on seeding Aadhar numbers in beneficiary databases and this job has to be done by the respective department. Once you seed the numbers then you push those records into the banks and then the banks will ultimately generalise it through the NPCI and then finally the amount gets into the bank accounts.

The challenge here has been accurate seeding of Aadhar numbers, which in many cases could not be done and the reason for that possibly was paucity of time. For a project of this nature to rollout you require time, not just to do the seeding, but to verify that the numbers which have been seeded have been done correctly.
We did not allow that time to be given for this particular project. Second aspect is it has to be done step by step. It cannot be done for the whole country in one go, because the nature of Aadhar enrolment also is not uniform across the country. There are states, there are districts where this has made significant progress and there are states and districts where still the number generation is very poor. So if you are planning to roll it out uniformly you will always face challenges in terms of the numbers being generated and the impact of it or the seeding of those numbers in the beneficiary databases.

Q: You are establishing that clearly it is not Aadhar to be blamed, but probably inaccurate seeding and not enough backing by the respective governments which might have led in several states for the system to not work.
Etiraj: LPG is a very interesting case. LPG was always a very good candidate because it was the oil companies who are equally interested in getting something like this going because they wanted to save on subsidies, so they were almost desperate to add this on.

Q: The sources close to the top management of oil companies said that when they first shared their databases they could read out purely through de-duplication some 10-15 percent of cards. So that was their biggest saving. In their Aadhar related areas if they looked at it where they could delete fake cards and ghost cards, the benefit was more like 2-3 percent, so while they were happy with it they thought that with Aadhar going away they were not really weeping that they are going to lose a lot of money they could have otherwise said.
Jaju: What I was trying to say it is not about the backing. One question you asked was, will a program like Aadhar survive as a voluntary exercise? To my mind it won’t. 

Q:
Yours was the happy case where both the central government and the state government were backing the project. What happens if that backing is removed? Will it be a lot of money wasted? How do you see it progressing?
Jaju: Yes, it would be. A project of this nature would definitely require the backing of the state, because here you are talking in terms of improving the targeting of the various welfare programs that the central government or the state government runs and you are trying to make use of Aadhar as an identity. Seed Aadhar into the beneficiary databases and use authentication mechanisms before you deliver the benefits to the targeted beneficiaries. So to my mind if you look at the post-Aadhar world you have two subsystems. First is the state subsystem, the government subsystem which is around the welfare programs that government run. Unless and until the state backs and not just back, they will have to very aggressively push Aadhar into the beneficiary databases and make this as the sole identifier and authenticate beneficiaries before the benefits are given.

Q: Your sense is the administrative officers will see the advantage of the program, they will back it. Do you think they will want to convince the new political masters of continuing, persisting with it?
Jaju: Obviously yes. We have reached a critical mass. We have generated more than 55 crore Aadhar numbers in the country.
Etiraj: When you say the colour of the next government and that determining whether Aadhar will continue there is no empirical evidence to show that any of the opposition government, if BJP is in the opposition for instance has really gone against it. You can see the top states - Maharashtra, Andhra Pradesh, Tamil Nadu, Madhya Pradesh, Karnataka, Rajasthan, West Bengal, they include ruling government and non-ruling government. The point being that there are enough buyers for this in other party ruled governments or states as well and therefore the chances of this going are as good. Having said that, any government can junk any project. We have seen that before and that can happen again if someone so decides, but I think the merits of this in terms of this achieving what it was set out to achieve are pretty clear.

Q: My suspicion is that the banking system or the financial inclusion angle will want Aadhar to continue. What is your sense?
Balachandran: Absolutely. There are two things. One is Aadhar being used as an identification first…

Q: I am asking you to imagine a time when the government may not actively push it. In that case do you think there is enough steam in the banking system to want it?
Balachandran: That is what I have to say that going beyond the DBT this is an identification process where people would like to indentify themselves with this particular number. It could be for opening of a bank account or it could be for drawing of amounts from the bank account or it could be for any kind of KYC process. For instance in NPCI we have initiated e-KYC, that means anybody who has got an Aadhar number can simply step into any bank branch and use that number for getting themselves identified and it is instant. As of now NPCI is providing this service without any fee, otherwise you can imagine how much it becomes a hurdle for anybody to open an account. It is not only for bank accounts and it is being used for all other financial sector transactions.
Etiraj: I think we have to come back to the fundamental point, why was this created? Like I said there were twin objectives. First was to provide every Indian resident a unique identity. The other thing is there is a study which is being done by two professors, one from Stern which says that at least 25 percent of the identities that are being created due to the Aadhar exercise are actually first time IDs. One of the biggest problems in this country is that people do not have an ID or surely do not have a portable ID. If I have an ID which associates me with a certain function or a benefit in the state of Maharashtra it is useless when I go even two districts away, leave alone leaving the state. So that was the fundamental problem. If everyone agrees that this is something that is asset to the future residents of this country then this is something that surely will work.
Latha: There has been opposition to it. One from those who believe that the privacy is violated. There is opposition from those who believe that there is no security of data as well. So these could be advanced as well. nor has Aadhar ever been espoused as an instrument to control corruption. For instance, NREGS payments. NREGS payments can always be leaked out, siphoned out if there is a collusion between the administrative officials.
Etiraj: Since you mentioned NREGS 2.5 million transactions a month are happening to beneficiaries of NREGA. We did not touch NREGA so far, but 2.5 million transactions, in the context of India it is a very small number, but in the context of Aadhar it is reasonable.

Q: What is your hunch? Do you think there is enough private sector use for it or private sector has seen enough use for it to want it to continue?
Etiraj: I look at the number. 570 million Aadhars issued of an active population maybe of let us say 750-800 million assuming the rest are all children and so on who may not use it for a while. I think that is sufficient momentum for demand and push both. Mr. Balachandran spoke about the demand side and my sense is that the demand side will keep increasing. Sanjay Jaju also spoke about the demand side, my sense is that will keep increasing because people like him want to use this to clean up their databases and make their states more economically sound.
Latha: In terms of use, for instance in Chhattisgarh there is enough evidence that smart cards were used in several districts and those have been portable. Wherever there is a POS machine the smart cards could provide grains and they were a cheaper option.
Etiraj: Not necessarily, but that is a different argument. I think smart can never travel out. That is why said go back to the original proposition, national identity that is truly portable and dynamic. None of these things, whether it is a smart card wherever it is is truly portable in that sense except maybe in a limited area.

Q: Do you think this will survive without if the government made it voluntary and not mandatory?
Balachandran: It can still survive because there are multiple uses and people would love to have an Aadhar card.

Q: What is your sense? Do you think state governments will go ahead with it because enough benefit has been seen?
Jaju: I think it has achieved the critical mass and it will be very difficult to junk it by any government. It would definitely require the backing of the government to flourish although it may survive or it may limp, but we need this to flourish, because this has the key to the better targeting of the benefits and to my mind it also allows us to clean up our databases.
Latha: I take your point that it is likely that even without too much government backing, even without a future government saying it is mandatory perhaps Aadhar has come to stay.
Etiraj: As a journalist let me tell you, the beauty of the government project is, one, they can get junked. Other is once you have got something going it is very difficult to stop it. There are lot of things which technically should not be there, but are still running. In this case there is greater agreement that it should be running at least amongst the few of us here as opposed to not running.

Sunday, February 9, 2014

RuPay Cards to reach 25 m

The National Payment Corporation (NPCI) plans to almost double the number of RuPay Cards, the homegrown rival to Visa and MasterCard, to 25 million over the next two months.

“We have so far issued 14 million RuPay cards, and this will touch 25 million by the end of March,” NPCI Managing Director and Chief Executive Abhay P Hota said.  NPCI is the nodal agency under the Reserve Bank that manages the national payment switch and has developed the RuPay Cards.

RuPay Card, Reserve Bank and domestic lenders-promoted NPCI’s answer to Visa and the MasterCards which control the domestic plastic money market, was launched in April 2012.

It has seen as many as 210 banks, including all public sector banks and some of the leading private sector ones, issuing these domestic debit cards, Hota said. He agreed, however, that most RuPay customers are urban cooperative banks and regional rural banks.

He also said Citi and HSBC will join RuPay system by July. “Today our cards are accepted on all ATMs (1.45 lakh), 8.4 lakh merchant terminals and 70 per cent of the e-commerce merchants,” he said.

About the quick acceptance, he said, for all the stakeholders it makes immense business sense as NPCI charges just 90 paise as the fee per transaction — 60 paise from the merchant and 30 paise from the issuing bank — with the same kind of security; the same on a Visa or MasterCard is as high as Rs 4.

“Our switching fee is only 60 paise for acquiring banks and 30 paise for issuing banks per transaction,” Hota said. On profitability, Hota said, “We will break even by the end of the seventh year (2018-19).”

Hota ruled out entering credit cards business as of now but was confident of traction in the international debit cards. Till now, Bank of Baroda, Central Bank of India and Saraswat Bank have issued RuPay international debit cards, being offered with the California-based Discover Financial Services. 

Friday, January 3, 2014

Benefits of RuPay Card - RuPay PaySecure

The Indian market offers huge potential for cards penetration despite the challenges. RuPay Cards will address the needs of Indian consumers, merchants and banks. The benefits of RuPay debit card are the flexibility of the product platform, high levels of acceptance and the strength of the RuPay brand-all of which will contribute to an increased product experience.
  1. Lower cost and affordability :

    Since the transaction processing will happen domestically, it would lead to lower cost of clearing and settlement for each transaction. This will make the transaction cost affordable and will drive usage of cards in the industry.

  2. Customized product offering :

    RuPay, being a domestic scheme is committed towards development of customized product and service offerings for Indian consumers.

  3. Protection of information related to Indian consumers :

    Transaction and customer data related to RuPay card transactions will reside in India.

  4. Provide electronic product options to untapped/unexplored consumer segment :

    There are under-penetrated/untapped consumers segments in rural areas that do not have access to banking and financial services. Right pricing of RuPay products would make the RuPay cards more economically feasible for banks to offer to their customers. In addition, relevant product variants would ensure that banks can target the hitherto untapped consumer segments.

  5. Inter-operability between payment channels and products :

    RuPay card is uniquely positioned to offer complete inter-operability between various payments channels and products. NPCI currently offers varied solutions across platforms including ATMs, mobile technology, cheques etc and is extremely well placed in nurturing RuPay cards across these platforms.

RuPay PaySecure

We are pleased to inform that RuPay Debit Cards can now be used for online transactions and payments through RuPay PaySecure an e-Commerce solution of National Payments Corporation of India (NPCI). RuPay PaySecure not only provides a platform for e- transactions but also gives the customers a complete unique shopping experience. The RuPay Card can be used at all ATMs, merchant establishments in India for online transactions and payments.


Key Features
  • The solution offers enhanced security measures in addition to the RBI mandated 2-Factor authentication viz. registration, OTP, image based authentication and anti-phishing measures.
  • Highly secure with unique anti-phishing properties
  • User friendly and smooth adaptability
  • Simplified architecture & transaction flow reduces transaction time, resulting in faster transaction processing and reduction in drop-outs
  • Customer Experience: During the online payment the cardholder’s authentication data is collected in a secured manner. Further, with help of a bank themed (Looks exactly similar to the card that the customer is holding) PIN pad the cardholder has to enter the PIN number while making the payment. The pad shuffles each time a digit is entered as an additional security measure.
Target Customers
  • All RuPay Debit Card Holders for online transactions viz. bill payments, online purchases etc.

RuPay PaySecure Usage

The following flow describes how the customer can use RuPay PaySecure to make online transactions:

PaySecure
  • It is mandatory for every customer to be registered with PaySecure to avail RuPay E-commerce services
  • Customers will be authenticated by their issuing bank using methods like OTP (One Time Password)/net banking credentials or challenge questions etc. or any other parameters defined by the issuer bank for the first successful transaction. The customer will have to complete one successful transaction to be registered.
  • Customer will have to select an image and enter a phrase to register his RuPay card for online usage during his first transaction on e-merchants website.
  • In subsequent transactions, the customer will have to identify the correct registered image in order to get primary validation and acknowledge the phrase along with last three online transactions. This is an anti-phishing measure.
  • Subsequently the image and phrase become level one validating factors (please note there validations only permit customer access to PIN Pad page and is not considered for final transaction authorisation). In case the customer forgets or exceeds the number of attempts for image selection they will need to wait till next business day for card to be unblocked or re-register to enter new phrase and select a new image.
  • Customer is required to use a valid ATM PIN for authorization of the e-Commerce transactions. Customer will have to enter PIN on the “bank themed” (Look of the page will be exactly similar to the physical card used by the customer) scrambling PIN pad using mouse clicks only. The PIN pad will shuffle each time a digit is entered. This is an additional security measure.
  • The customer will now be notified about the successful transaction on submitting a valid PIN.

Tuesday, December 17, 2013

Kotak Bank launches initiative to bring Bengal milk co-ops under banking system

Mumbai-headquartered Kotak Mahindra Bank Ltd on Tuesday rolled out its financial inclusion programme across 75 milk cooperative societies of Amul in West Bengal. 

Called “Kotak Samridhi”, the initiative was rolled out across the districts of Burdwan and Hooghly.
It will see direct transfer of money to farmers' prepaid cards for their daily produce. The money transfer process will take place within the same day. 

Earlier, the payment cycle would be of three days. 

“Approximately, 8,000 farmers supplying milk to Amul through these cooperative will benefit through the programme,” Tushar Trivedi, Executive Vice President & Head Branch Banking, Kotak Mahindra Bank, said. 

According to him, Kotak has tied up with National Payment Corporation of India (NPCI) for using their RuPay platform for issuing the prepaid cards. 

Farmers need not necessarily have a bank account with Kotak Mahindra to obtain payments.
However, cooperative societies need to have accounts with the bank. 

Replicating the model
Kotak, which began the pilot project on financial inclusion here in the State in August this year, will now roll out a similar scheme for Amul in Gujarat. 

Roll out is expected to happen in two months time (around February). 

Over three lakh dairy farmers across 1,200 cooperative societies in the State will be part of the programme. 

“In Gujarat, roll out will happen in a phased manner,” Trivedi said. 

Kotak is also talking to other cooperative societies in Haryana and Punjab for extending the roll out to wheat and paddy. 

Talks are, however, in a nascent stage.

Friday, November 22, 2013

PayUPaisa Launches Release On Delivery (RoD) For E-Commerce Customers

PayU India’s online payment solution PayUPaisa has launched a new payment option called Release On Delivery (RoD) using which customers can release the payment for the product purchased online after receiving the product.

The company states that this option has been launched with the intent of  helping customers gain more trust on the merchants, while also helping merchants reduce the high transaction cost incurred through third-party Cash on Delivery (CoD) services. PayUPaisa claims that  the average cost per CoD transaction borne by a merchant is as high as 8% to 10% as compared to an online transaction which costs 2% to 2.5%. Therefore CoD continues to be a challenge although it constitutes 60% of the transactions done through e-commerce sites such as Myntra and FashionAndYou. It is worth noting that most e-commerce sites except Amazon have a minimum order value to provide CoD for transactions. Flipkart has limited the transaction value of CoD in Uttar Pradesh to Rs 10,000.

How does it work? During check-out, customers are shown multiple payment options such as credit card, debit card, netbanking or CoD to choose from.  On selecting CoD, RoD payment option is also offered to customers. On selecting RoD, payment can be made through credit card, debit card or netbanking. PayUPaisa releases the payment to the merchant either on receiving information from the buyer or by default after 3 days of product delivery.

RoD payupaisa

It is also worth noting that eBay already has a similar feature known as PaisaPay available on its website for its buyers and sellers to transact. However, on eBay, sellers are paid only during the next payment cycle and are charged at 4.5% + applicable taxes for processing the payment.

Launched in April 2013, PayUPaisa claims to offer free hosted web stores with services like email invoicing, easy website integration and free payment gateway, among others. In July 2013, the company had waived off its transaction discount charges (TDR) for both new and existing merchants until September 30, 2013. In September 2013, it had also launched an automated all-in-one-payment solution targeting e-commerce marketplaces and aggregators that operate in different segments like travel, real estate and collect fees or payments.

Other developments

In July 2013, e-commerce major Flipkart had launched its own online payment solution PayZippy. The company had also applied for a license to launch a a semi-closed prepaid wallet for consumers.
In June 2013, National Payments Corporation of India had launched an e-commerce solution called ‘RuPay PaySecure’. NPCI had partnered with an US-based online payment service provider Acculynk for this initiative.

TLabs incubated VA Tech Ventures Pvt Ltd. had also launched its operator agnostic prepaid mobile wallet, Happay that syncs with mobile number and SIM card to allow P2P and B2C transactions.
In February 2013, CCAvenue had also launched a free package for e-commerce websites that intend to use CC Avenue as their payment gateway. Few months later, it had also introduced an in-stream payment collection service for social networking websites called Social Networks In-stream Payments (SNIP).

Tuesday, November 5, 2013

Rural banks asked to promote Rupay cards

The National Payments Corporation of India (NPCI) has pressed the Regional Rural Banks (RRBs) to promote RuPay cards to facilitate electronic payments and transactions among the people living in the remote rural parts.

A team of NPCI, the Central organisation mandated by RBI and Indian Banks Association (IBA) to build central infrastructure for payment systems like ATM switching, mobile payments, 24x7 remittance and financial inclusion transactions, visited Nuapada district and advised Utkal Gramin Bank to issue RuPay cards to their customers on a priority basis.

RuPay has been developed as an alternative to international payment gateways like VISA and Mastercard, providing lower costs and affordability along with protection of payment information related to Indian consumers.

It acts as a domestic open-loop system allowing Indian banks and financial institutions to participate in electronic payments, assistant manager, NPCI, Deepak Satpathy said.

Wednesday, October 23, 2013

Insurance cover coming for online fraud - Rupay Card


Both Visa and MasterCard offer this feature. RuPay cards by NPCI will also start offering this by the end of this year or early January,

With the rise in cases of online fraud, National Payments Corporation of India (NPCI) has decided to provide an insurance cover for such transactions.

NPCI will tie up with general insurance companies for this; it has called for a Request For Proposal (RFP). This would cover both domestic and international transactions, all those done by swiping a card, PIN-based transactions on ATMs or points of sale and e-commerce transactions with two-step authentication.

According to the Kaspersky Consumer Security Risks Survey, a global study conducted by B2B International and Kaspersky Lab in the summer of 2013, about 41 per cent of users who lost their money as the result of financial cyber-fraud failed to get a single cent returned to them. And, only 45 per cent of users who suffered through online fraud were fully compensated. In 17 per cent of cases the money disappeared during e-banking sessions; 13 per cent of the victims were customers of online stores.

“Technology is changing the fraud landscape and challenging the boundaries of fraud risk management. The (earlier) frameworks to mitigate simple frauds are no longer effective,” Rohit Mahajan, partner and co-head, forensic services, at KPMG in India, had said while issuing an India Fraud Survey last year.

The NPCI insurance cover will be over and above any policy taken by a member-bank. The policy will cover compromised and disputed transactions carried on the National Financial Switch (which facilitates inter-bank ATM transactions) ATM Network. It will also cover disputed transactions on the NFS Network. The RFP issued by NPCI is to identify and appoint the general insurer for providing insurance cover for fraudulent transactions that result in financial loss to the customers of NFS members or sub-members; also for non-bank ATM operators.

“This is a good opportunity for the insurance community. We will be interested in taking part in the bidding process, since it is a large and prestigious contract,” said a senior official of a state-owned general insurance company.

NPCI will initially cover Rs 180 crore of approved financial transactions under the insurance policy with the selected bidder. If the transaction volume goes beyond the initial committed volume of Rs 180 crore, NPCI shall request an additional cover.

The overall insurance cover that will be provided will be Rs 10 crore and the per-card cover will be Rs 50,000. The insurer (which wins the bid) will have to settle claims within 30 days of claim submission by NPCI. Further, the bidder will also have to honour the request from any member-bank(s) for any additional cover sought, once the policy is issued to NPCI and is in force. The premiums will be paid by NPCI.

To be eligible for the bid, an insurance company should have a minimum of three years of operations in general insurance in India as on March 31. Also, a minimum gross direct premium income of Rs 250 crore for 2011-12 and 2012-13, respectively. The non-life insurer is also required to have a minimum claim settlement ratio of 75 per cent in the past three financial years and not be currently blacklisted by NPCI, any government body or financial institution in India. All this would mean only the large private general insurers and the four state-owned general insurance companies will be eligible.

In case of a disputed transaction using a debit/credit card, it is the customer's responsibility to prove he is not at fault. Till then, they are liable to pay for the transaction. As a protection against this, one can opt for credit or debit cards which have the zero-liability feature. Both Visa and MasterCard offer this feature. RuPay cards by NPCI will also start offering this by the end of this year or early January, said an official.

Monday, October 21, 2013

Banks yet to cut debit card fee at fuel pumps - Rupay Card

A year after the Reserve Bank of India (RBI) announced a cut in charges on debit card transactions, banks continue to impose a fee of 2.5% for payments at petrol pumps, thereby making an undue gain at the cost of the consumer. Earlier this month, large banks thwarted an attempt by the RBI-promoted National Payments Corporation of India (NPCI) from capping charges on debit cards that are part of NPCI's Rupay network.

Last year, RBI asked banks to cap the charges on debit card transactions at 0.75% for transaction values up to Rs 2,000 and 1% for larger transactions. But in debit card transactions at petrol pumps, banks continue to impose a 2.5% surcharge, which are mostly passed on to the consumer.

Sources said that NPCI had sent a communication to banks asking them not to charge more than 1% on its Rupay cards. Rupay cards were introduced by NPCI as India's answer to MasterCard and Visa. Sources said that the move has been stymied by banks who have called for more discussion on the issue.





The 2.5% surcharge has its origins in the days when credit cards were in their infancy and debit cards non-existent. Typically, when a bank installs a credit card swipe machine at a retail outlet, its agreement with the merchant bars any kind of surcharge being passed on to the customer.

But in the case of petrol pumps and Indian Railways, an exception was made allowing them to pass on the charges (described by banks as 'merchant discount rate'), to the customer. The exception was made to end an impasse where these government entities were refusing cards on the grounds that their margins were too low to absorb the credit card charges of 2.5%.

RBI, while slashing charges on debit cards, had used the rationale that the transaction cost of credit and debit card should not be identical. This was because credit card transactions required the bank to provide free credit to the customer until the monthly bill was issued. The bank also took on the risk of the customer defaulting on his obligations.

In debit cards, the money goes straight out of the customer's bank account and the only expenses are on account of using the network and in respect of security of transaction. In the West, regulators have already started capping charges on debit card transactions.

Bankers say that a huge transformation is taking place in payments as debit card transactions are set to outstrip payments by credit cards in coming years. In July 2013, banks saw 4.23 crore credit card transactions as against 5.24 crore debit card transactions. In value terms, however, credit card transactions continue to be higher at Rs 11,038 crore as against Rs 7,722 crore under debit. With the focus now on financial inclusion, the number of debit cards and set to go even higher.
 

Zero-liability cards are useful - Rupay Cards

The sheer fear of loss of a credit or debit card can give ulcers to most. Besides the monetary liability, it involves running from pillar to post to get the card blocked.

In case of a disputed transaction, it is the customer's responsibility to prove it is not his fault. Till then, he is liable to pay for the transaction. Eventually, if the customer is able to prove he is not at fault, the bank will refund the amount, but this could take time. To protect yourself against this, you can opt for credit or debit cards which have the zero-liability feature. Both Visa and MasterCard offer this feature. RuPay will start offering this by the end of this year or early January, said an official from National Payments Corporation of India. But unless your card issuing bank offers this facility, you cannot avail of it. Banks have to incur an additional cost for the insurance to cover the liability in case of a loss of card, which pushes up their cost, which is why not all banks offer it, while some offer it on select cards.

The advantage of this is that once the card is reported stolen or lost, the cardholder is not liable to pay for any transaction made on the card. In case of a debit card, the amount transacted will be restored to the cardholder's account.

While this is a given in some parts of the world, in India banks offer it selectively, says Uttam Nayak, group country manager for India and south Asia, Visa. The card company introduced this feature in India in 2004. There is no additional fee that the customer pays for this. “We realised that fraud was a big concern for customers,” he says.

ICICI Bank, HDFC Bank, Axis Bank and Standard Chartered Bank do offer this. But cardholders need to keep in mind the feature will not work in case of an automated teller machine or online transactions, since this requires the use of the PIN. It will work only if the card is used to swipe at a point of sales, at a shop or a merchant establishment.

Some banks may ask you for a written application with your card number, account number (in case of debit card) and date of loss of card; copy of the police complaint and copy of passport in case of a fraud abroad. While some banks insist the theft or loss should be reported within 24 hours for the facility to kick in, some allow up to 15 days.

While zero-liability as a policy is in countries like the US, in India it is not so. The Reserve Bank of India has indicated it would like to introduce a system whereby the customer would not be held liable in case of fraud transactions. But there has been no further guideline or further instruction from the regulator.

Saturday, October 19, 2013

Banks yet to cut debit card fee at fuel pumps - Rupay Card News

A year after the Reserve Bank of India (RBI) announced a cut in charges on debit card transactions, banks continue to impose a fee of 2.5% for payments at petrol pumps, thereby making an undue gain at the cost of the consumer. Earlier this month, large banks thwarted an attempt by the RBI-promoted National Payments Corporation of India (NPCI) from capping charges on debit cards that are part of NPCI's Rupay network.

Last year, RBI asked banks to cap the charges on debit card transactions at 0.75% for transaction values up to Rs 2,000 and 1% for larger transactions. But in debit card transactions at petrol pumps, banks continue to impose a 2.5% surcharge, which are mostly passed on to the consumer.

Sources said that NPCI had sent a communication to banks asking them not to charge more than 1% on its Rupay cards. Rupay cards were introduced by NPCI as India's answer to MasterCard and Visa. Sources said that the move has been stymied by banks who have called for more discussion on the issue.






 
The 2.5% surcharge has its origins in the days when credit cards were in their infancy and debit cards non-existent. Typically, when a bank installs a credit card swipe machine at a retail outlet, its agreement with the merchant bars any kind of surcharge being passed on to the customer.

But in the case of petrol pumps and Indian Railways, an exception was made allowing them to pass on the charges (described by banks as 'merchant discount rate'), to the customer. The exception was made to end an impasse where these government entities were refusing cards on the grounds that their margins were too low to absorb the credit card charges of 2.5%.

RBI, while slashing charges on debit cards, had used the rationale that the transaction cost of credit and debit card should not be identical. This was because credit card transactions required the bank to provide free credit to the customer until the monthly bill was issued. The bank also took on the risk of the customer defaulting on his obligations.

In debit cards, the money goes straight out of the customer's bank account and the only expenses are on account of using the network and in respect of security of transaction. In the West, regulators have already started capping charges on debit card transactions.

Bankers say that a huge transformation is taking place in payments as debit card transactions are set to outstrip payments by credit cards in coming years. In July 2013, banks saw 4.23 crore credit card transactions as against 5.24 crore debit card transactions. In value terms, however, credit card transactions continue to be higher at Rs 11,038 crore as against Rs 7,722 crore under debit. With the focus now on financial inclusion, the number of debit cards and set to go even higher.