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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