In the wake of rising frauds in the payments space, the Reserve Bank of India said that overseas money theft through cloning of debit cards took place due to non-practice of authentication processes in those countries.
"The problems relating to illegal debit card transactions happened because we are inter-linked, and the two-factor authentication and the other security measures did not exist in overseas market where these cards were cloned and used," said G Padmanabhan, Executive Director, RBI, while speaking at a partnership announcement of Western Union Money Transfer and Kotak Mahindra Bank.
According to him, "Technology has enabled an interlinked world and payment infrastructure. While this is welcome, being able to initiate payment transaction even from top of Mount Everest, please also remember that you are as good as the weakest link.”
Urging Kotak and Western Union to put systems in place to address these concerns, Padmanabhan said some violations have started happening particularly in the area of money transfer.
Recently, customers of the third largest private sector lender, Axis Bank, had complained of amounts getting withdrawn overseas. In its investigation, the law enforcement agencies found out that some ATMs were allegedly compromised by fraudsters to clone the cards and the account details were used to withdraw money in Greece.
“I don’t know if crores of money issues have come out, while the people who dealt with such violations remain in the system," Padmanabhan said.
He said while we (RBI) are taking so many new measures, the system is looking for a first mover to answer “if moving to EMV chip and pin is the only solution to fraud in card transactions or are there better solutions?”
“Why are banks not exercising zero liability credit card and debit card transactions to its customers, what is standing in the way?” he asked.
Giving other suggestions, Padmanabhan said if card as a payments instrument can be replaced by mobile-based call options, which do not have a physical presence so that cloning is not possible? He also asked if banks to aggressively explore the NEFT technology and what is coming in the way of exercising zero liability credit card and debit card transactions to its customers.
Kotak Mahindra Bank, Western Union tie-up
Western Union will act as a Business Correspondent to the bank to allow customers to remit money ranging from Rs 100 to Rs 5,000 per day. The customers will be charged a fee ranging from Rs 30 to Rs 75 for transferring the amount.
Western Union makes 28 transactions per second, said its President and CEO, Hikmet Erse.
The services will be available from today at 500 retail locations in India.