Reserve Bank of India (RBI) has issued fresh notification, which mandates and instructs all banks to issue only EMV and Pin based debit and credit cards for their customers. The deadline for the implementation of this directive is September, 2015; and all new cards issued henceforth have to be under this new format.
These new guidelines have been issued under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007). The RBI notifications states, “Accordingly, banks are advised that with effect from September 1, 2015 all new cards issued –debit and credit, domestic and international — by banks shall be EMV chip and pin based cards,”
EMV stands for Euro pay MasterCard Visa, while PIN is acronym for Personal Identification Number.
RBI observed that several banks were still issuing cards with magnetic strips. This new rule governing the issuance of new debit/credit cards has been made mandatory to secure transactions and enhance security aspects of non-cash based transactions, which are exploding at an amazing pace. Besides, due to the rapid adaption of ecommerce, Card Not Present (CNP) transactions are also increasing, which are prone to frauds.
As per RBI, most of the point-of-sales terminals across the nation are now equipped to handle EMV and Pin based cards which makes it an appropriate time to initiate the change. Additionally, all debit cards now support ‘PIN based insertion system’ to carrying on transactions.
How Will EMV Stop Frauds?
EMV or Europay-Mastercard-Visa is a global standard for authenticating transactions using an integrated chip; rather than a magnetic strip which is prone to counterfeit and skimming.
This standard is now defined and managed by EMVco LLC, a public company. As of now, 6 of the world’s largest payment processing and credit companies are part of this alliance: MasterCard, Visa, JCB, American Express, China UnionPay, and Discover.
Magnetic strips, which depend on visual check of the signature and hologram is way less secured than EMV standards, which has an integrated chip to verify the credentials of the person whose card is being used for the payment. All modes of payment: online, offline, telephonic, card-less etc are currently supported by EMV.
After the verification of EMV chip, the user is prompted to enter a Pin code which further validates the transaction.
In Europe and some parts of USA, in case the merchant is not accepting EMV and a fraud happens due to the usage of magnetic strip, then the whole liability falls on the merchant rather than the issuer of the credit/debit card. Although RBI hasn’t yet made such a rule here in India, it is expected that in order to curb frauds and enhance security, this may become a reality in India soon.
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