India’s central bank has simplified the process of making low-value transactions online.
The Reserve Bank of India (RBI) has done away with the two-step verification for online transactions valued less than Rs2,000, it said in a notification late on Dec. 06. This essentially means that credit or debit card transactions where the actual card is not present will not need the additional layer of security in the form of a one-time password (OTP), which is required at present.
The move comes at a time when prime minister Narendra Modi’s demonetisation project has forced Indians to resort to digital banking. The RBI’s easing of rules will only encourage digital banking and is a welcome step for e-commerce firms, online ticket booking companies, and taxi-hailing apps.
Card users, however, will have to opt for this facility with their banks. There will be a one-time registration process requiring card details and an authentication step before the service is activated, the RBI notification added.
“Thereafter, the registered customers will not be required to re-enter the card details for every transaction at merchant locations that offer this solution and thereby save time and effort,” the RBI said.
Cashless economy
The digital payments industry in India is estimated to reach $500 billion by 2020, according to a report by Google and Boston Consulting Group. By 2023, the report estimates that non-cash transactions will exceed those done with cash.
However, rules like the two-step authentication even for small transactions have been a hindrance to the growth of electronic payments. Foreign firms like Uber, for instance, have come under the RBI’s radar in the past for not adhering to these rules. The taxi-hailing app has been pushing for a “more convenient and seamless” process for digital transactions.
“This waiver is a big leap in the right direction to bring ease and convenience to the use of cards over cash and will strengthen the foundation for India to become a leading digital economy,” Amit Jain, president, Uber India, said in a statement after the RBI announcement.
Uber’s top competitor Ola also welcomed the measure. It said in a statement that this move will “encourage more users to switch to debit and credit cards for online payments.”
Itika Sharma Punit contributed to this story.