Credit cards are rising as a preferred mode of payment for many Indians. It offers additional purchasing power to the users along with several other benefits in the form of reward points, cashback and more. However, cases of hacking and online fraud are also on the rise lately. To make cards more secure, RBI has taken several steps over the years to protect card users from any fraud. Some such steps include tokenisation, OTP verification and a few new rules that will benefit credit cardholders in various ways. Here are some of the major steps taken by RBI to make credit cards safer:
1. Credit Card Tokenisation
The Reserve Bank of India (RBI) has mandated credit card tokenisation for all merchants, payment gateways and e-commerce platforms. Tokenisation refers to the replacement of actual credit card details with a code, which is known as a token. This token is unique for a combination of cards, token requestor and device. Therefore, cardholders need not to fear about the saved card details.
Under tokenisation, the token is shared with the merchant instead of credit card details whenever a transaction is made. This way, fraudsters will not be able to save the card details which increases the safety and security for credit card transactions. However, tokenisation is not mandatory as it depends on the cardholder whether he/ she wants to opt for it. In case a cardholder does not opt for tokenisation, they cannot save their cards on platforms. Every time they need to make a payment, they will have to enter the card details.
2. Disallowed Auto-debits for Recurring Payment Transactions
Recently, the RBI has issued guidelines to stop automatic recurring payments for services offered by various companies, such as Amazon, Netflix, Swiggy or other apps. RBI has asked credit card issuers to inform cardholders at least 24 hours before any recurring transaction. This simply means that card issuers cannot directly debit money from the credit card without informing the cardholder. They must send a notification to the cardholder for any auto-debit transaction via SMS or email at least 24 hours before the payment.
Also, if the recurring transaction is above Rs. 5,000, then cardholders have to enter an OTP to proceed with the transaction. In case the user does not authenticate the transaction via OTP, the recurring payment will be put on hold. This acts as a reminder to the cardholders and protects them from any fraudulent transaction. Additionally, this also allows cardholders to cancel or proceed with the transaction as per their requirements.
Read more: How does a credit card work?
3. OTP for Credit Card Transactions
RBI has added two-factor authentication on credit card transactions by adding another layer of One Time Password (OTP). Earlier, cardholders were allowed to make any transaction by entering their credit card details, such as card number, CVV and expiry date. But now, cardholders receive an OTP on the registered mobile number by the respective credit card issuer to proceed with the transaction. OTP is a six-digit number that is unique for every transaction and comes with a validity of a few minutes. The cardholders are required to enter that OTP to complete the transaction.
Though this rule is not new, it has certainly made credit card transactions more secure. Adding this two-factor authentication is definitely an advancement in credit card usage as no transaction can be processed without entering the OTP. This acts as an added layer of security for credit card transactions which increases the convenience, safety and security for the users.
Also read: How to use credit cards safely?
4. More Transparency around No-cost EMI Transactions
As per the new RBI guidelines, card issuers should maintain complete transparency for the conversion of credit card transactions into EMIs. They should inform the cardholder about all the details, including principal, interest and additional discount, before proceeding with the conversion. Similarly, the issuer should also mention the same thing in the credit card bill/ statement. Also, EMI conversions with interest cannot be promoted as a no-cost EMI.
This rule has definitely brought some transparency and also increased the awareness around the users. Now, the users will be informed about all the charges before converting their credit card transactions into EMIs, which will help in reducing the chances of mis-selling.
Also, just like EMI conversion, the card issuers should provide a key fact statement with all the important details to cardholders during the credit card application process to increase transparency. Earlier, card issuers used to send the details along with the physical credit card, that was provided after card issuance.