This news will definitely come as a big relief to credit card companies operating in India. In November last year, RBI had come out with a directive that said that Indian Banks who issued credit cards to consumers, will need to implement biometric scanners on their POS swipe machines that will support Aadhar biometric authentication.
This had caused lot of heartburn, because implementing biometric authentication was not only extremely expensive, but also had potential to create more failed transactions.
The new RBI directive of putting it on hold seems to have come about because majority of banks were unwilling to implement biometric authentication across their PoS terminals (credit card swipe machines) given the number of challenges they faced with it.
Rather than implementing it fully, RBI has decided that they will do a pilot project with central bank, where issuers of prepaid cards will be allowed cash withdrawals facility for their subscribers on the basis of biometric authentication.
A senior banking official told ET that, “By running the pilot project on pre-paid cards, RBI is killing two birds with one stone. The pre-paid card issuers have been hankering for a ‘cash out’ facility for long. By allowing ‘cash out’ with biometric authentication, RBI has kept pre-paid issuers happy. It also ensures that these companies have a strong incentive to make biometric authentication work”
This is good news for pre-paid card and wallet issuers as well, because till now wallets and pre-paid cards were only allowed to be used for bill payments, online purchases of tickets etc. With the new pilot project, consumers will be able to withdraw cash from their wallets/pre-paid cards using biometric authentication.
With implementation of this pilot project, companies like Oxigen, Airtel Money, Itz Cash, mpesa and others can start offering cash-out facility through their network establishments across India.
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Very helpful