Keeping Frauds At Bay

The next time you go online and try to use your credit card to pay your bills or book airline tickets do not be surprised if you are directed to your bank’s website asking you to enter a password. This is part of the new initiatives implemented by the RBI in a bid to curb hackers and thieves from misusing credit card information. The Reserve Bank of India, through a recent circular, has directed banks to make additional authentication mandatory for credit/debit card online transactions from August 1.

Banks have to issue a PIN code, called as Verified by Visa or MasterCard Secure Code, which will be known only to the customers. Customers have to use this second verification PIN code, apart from the Card Verification Value Number (CVV), for making purchases. Banks will be liable to attract penalty under the Payment and Settlement Systems Act 2007 in case of non-adherence with the directive. However, if you think the new security system acts like a guarantee providing for cover against online frauds, you are mistaken.

Verified by VISA or MasterCard Secure Code only pro-vides an extra layer of security. In case a wrong password is entered as part of this extra authentication, the bank informs the e-commerce merchant and if the merchant still goes ahead with the transaction, it becomes his/her liability. On the other hand, if the password is correct and even if the customer disputes the transaction, it is still a customer’s liability. Surprised? Well, here’s a ready reckoner on what does the new security layer means for you as a card holder.

From the card holders’ perspective, an additional layer of protection gives a lot more comfort in terms of security for the online transactions using credit/debit cards, thus reducing the chance of an online fraud. While this will mean that you will have to go through another step to complete your transaction online, it’s definitely worth it if it protects you from losing your hard-earned money. Some banks, in fact, have gone a step ahead creating a security wall. For instance, while generating the 6-digit PIN as an additional security layer, at a few banks you are also asked to type a message, known as a personal assurance message.

This message is known only to you and when you type your credit card number on the merchant’s website, it will take you to the bank’s website to complete the transaction, where you need to type in the PIN. A few banks like American Express follow the ‘address verification system’ wherein you are asked for your billing address apart from card number, expiry date, and CVV number if you want to make an online transaction. The system however has a major drawback. Since your address is the fourth security element for online transactions, you need to exercise caution whenever you are filling feedback forms where you mention your address.[PAGE BREAK]

As of now, all the banks have indicated that the new security layer ser-vice will come at no additional charge. However, if one has a closer look at the terms and conditions for becoming a party to the Visa/Master-Card Secure Code, it clearly mentions that you agree to bear the charges as may be stipulated by the bank from time to time for availing of these services and hence there is a possibility that you might be charged by the bank in the future. The new guidelines also make it compulsory for banks to intimate the customers via an online alert system for any transactions exceeding Rs 5,000 on their card and hence you as an individual need to activate this service on your account in case any unauthorised transaction takes place.

Take Home: The RBI’s new directive will ensure that all credit cards will stop functioning online, unless registered with the bank. This level of authentication required by all cards for online transactions is an attempt to further dissuade fraudsters from taking advantage of naive card users. Many banks have already begun implementing this procedure and those that haven't will have to now do so at the earliest. Experts are happy with the move as this is a step closer to fool proof online transactions.