Nandan Nilekani’s #Aadhaar faces fight from a team of Europay, Mastercard & Visa #UID


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By Sugata Ghosh, ET Bureau | 17 Jun, 2013,
Nandan Nilekani‘s Aadhaar project faces fight from a team of Europay, Mastercard & Visa
MUMBAI: This could be a sign of what the future holds for Aadhaar. Amid an alarming rise in credit card frauds, data thefts and card cloning, a group of bankers will decide in a month the appropriate payment technology for the Indian banking system and retail consumers.
If the group votes for EMV – an internationally accepted technology standard for authenticating credit card, debit card and ATM transactions – Aadhaar, which is comparatively untested and follows a different technology, may face an uncertain future. EVM is a joint initiative between Europay, Mastercard and Visa – the world’s leading payments service providers.
Credit and debit cards that are based on EMV have the card and CVC numbers, which are the key to any electronic transaction, hidden or encrypted. Since encrypted data reduces the risk of cloning or skimming at ATMs and merchant outlets, some of the private banks have started upgrading their systems to EMV standards following recent card frauds.
But, if the group, constituted by the Reserve Bank of India, prefers Aadhaar, banks will have to change their systems, procure biometric machines and prepare for different security standards. Bankers, however, are reluctant to spell out their stand openly because the government thinks Aadhaar can be a game changer in disbursing subsidies to people in far-flung regions.
Besides, banks, particularly the state-owned lenders, are unwilling to take on Nandan Nilekani, the former InfosysBSE 1.05 % CEO who heads the Unique Identification Authority of India (UIDAI), the state-owned agency that issues the 12-digit Aadhaar numbers.
“Mr Nilekani is pursuing Aadhaar with RBI. He has a standing and has political backing,” said a person familiar with the discussions.
Transition Could Take Some Time
“So, while many banks are in favour of EMV due to rising incidents of frauds, they are quiet, waiting for the committee to submit its report, which is expected by early July,” said the person. If the committee recommends Aadhaar for banks, it will be a victory for UIDAI. Banks will then have to use Aadhaar for not only customer authentication, but also for payments. But even if banks are mandated to implement Aadhaar, the transition could take time and a slice of the market will move back to cash. So, it will be some years before Visa and Mastercard feel the threat.
Indian banks’ payments technology for retail customers is currently at crossroads. ATM transactions are processed through the state-backed National Payments Corporation, which is being positioned as an umbrella organisation for processing all retail payments, while credit and debit card transactions are processed by multinationals like Visa and MasterCard. National Payments Corp, headed by Nilekani’s former boss NR Narayana Murthy, is unable to support EMV at present for its network and will have to change its standards if EMV is implemented by banks.
“What’s drawing banks towards EMV — and many Asian banks have already migrated to it — is the vulnerability of the magnetic stripe technology that’s used for credit and debit card transactions today. Micro devices can be planted in ATMs machines to copy the magnetic stripe and scan the PIN to clone cards. This is not possible in EMV where the data is encrypted,” said a banker.
Highlighting the monopolies in the industry being created, the Financial Sector Legislative Reforms Commission (FSLRC) has recommended the Competition Commission to look into the subject. Meanwhile, the RBI governor has set up a committee to come out with a discussion paper on Aadhaar as an additional factor of authentication for card transactions. While Aadhaar can be used for authentication and KYC purposes, the regulator would like a final answer on whether it can be used for payments.

 

 

 

 

Credit Card issuers in a fix over Aadhaar #UID


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 , TNN | Jun 12, 2013, 06.48AM IST

 

MUMBAI: Credit card issuing banks are in a fix over Reserve Bank of India‘s move to consider Aadhaar as an additional factor for authentication of credit card transactions in shops. The reason – a huge investment in upgrading credit card swipe machines and prospects of losing customers in states whereAadhaarenrolment has been slow.

RBI had constituted a working group headed by Pulak Kumar Sinha, general manager, State Bank of India, to study the feasibility of Aadhaar as an additional factor for authentication of card-swiped transactions and the panel is set to submit its report by the month-end.

The scheduled release of the report will coincide with the deadline which RBI has set for card-issuing banks to migrate to EMV cards and PIN-based authentication for transactions by end-June. EMV cards are smart cards that have an embedded chip, while PIN authentications require card users to punch a secret code on the swipe machine every time they pay by card.

Given the uncertainty over whether Aadhaar-based authentication will come into place, banks have been reluctant to make large investments in upgrading their credit card swipe machines. Also, some bankers say that if Aadhaar-based authentication becomes mandatory, some cardholders may drop out since there is a huge section of the population which has not got an Aadhaar number. As a result, some card issuers may end up missing the June 30 deadline for moving toward an EMV- plus PIN-based authentication.While biometric authentication is secure, card issuers say they have issues with it. For one, since fingerprint images require much higher bandwidth, this will add to the communication costs. Secondly, bankers say that authentication typically requires matching of multiple fingers and this uses up bandwidth as well as time. The biggest hurdle is that this will require over seven lakh point of sales terminals and perhaps automated teller machines to be upgraded and would incur capital expenditure running into thousands of crores.

The introduction of compulsory EMV chip cards and PIN confirmation for transactions was proposed in the wake of widespread credit card frauds that took place earlier this year. RBI had told banks in a circular that they should migrate to EMV and chip cards. Bankers feel that there could be some pressure from the government to push Aadhaar as part of banking transactions, which would make it mandatory for cardholders.

Bankers say that although Aadhaar enrolments are picking up on account of it being made mandatory for LPG subsidy, the numbers are still low in large states like Tamil Nadu and Gujarat.

 

 

 

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