RBI: All firms must apply 2-step payments for credit cards

'Domestic card transactions ignoring additional verification process'

The Reserve Bank of India (RBI) said all transactions involving domestic credit cards must follow rules requiring additional verification, a stance that could impact companies such as Uber Technologies Inc that provide more simple app-based purchases.

The apex bank’s stipulation came after noticing few entities evading the mandatory additional authentication process where payments are made by customers for a service via 'Card Not Present' (CNP) transactions.
Various e-commerce and Interactive Voice Response transactions come under such payments. It also applies to all transactions using cards issued in India for payments on merchant sites even where there is no outflow of foreign exchange.

The announcement on Friday comes after local taxi companies had complained that Uber was not following the two-step verification process required for credit card transactions in India, according to media reports.

All Uber payments are directly processed using the customer's stored credit card information in a simple process that bypasses any monetary exchange between drivers and users. Although the RBI did not specifically address any company, it noted "it has come to our notice" cases in which domestic credit card transactions avoided the additional verification process by using an overseas payment system.

The RBI noted companies would have until October 31 to ensure the two-step verification process was being followed, while noting that payments must be routed through a domestic bank and settled in Indian rupees.

“It is advised that entities adopting such practices leading to wilful non-adherence and violation of extant instructions should immediately put a stop to such arrangements," the RBI said in a circular.

San Francisco-based Uber did not immediately respond to an e-mail from Reuters seeking comment.
RBI has clarified that the linkage to an overseas website/payment gateway cannot be done via CNP transactions.

It said such camouflaging and flouting of extant instructions on card security were resulting in an outflow of foreign exchange in settlements of these transactions.

The apex bank said that it is not acceptable as this is in violation of the directives issued under the Payment and Settlement Systems.

It said such transactions have to be through a bank in India and the transaction should necessarily settle only in Indian currency.