Checkmate: India gears up to combat rising credit card defaults‏

In a recent development against rising credit card defaults, Indian government has introduced a revolutionary step. With its new PIN policy, the bankers and other institutions are now gearing up for additional security to the users, which will check the fraudulent activities.

Since August 1, all the online buyers who love to spend through credit cards now have to provide an additional PIN number as an additional security before making any purchase. Hence, you have to remember the Personal Identification Number (PIN)/password for your credit or debit cards, otherwise forget about using them.

The new PIN or password can be called as a second level of security before completion of the transaction so that even if somebody notes your card number, he cannot misuse it for online shopping. When a person enters your credit card number on the merchant’s website, it will redirect you to the bank’s website for the completion of transaction, where you need to type in the PIN.

Earlier this year, the Reserve Bank of India had announced an additional authentication pass-code verified by Visa or MSC (MasterCard Secure Code) mandatory for all the credit card holders. This PIN number is in addition to the other information already there on the card like name, card number, expiry date and CVV (card verification value) number.

The recent effort is derived from the government with EMV technology standard that underpins chip and PIN transactions in UK credit and debit cards. EMV technology stands for Europay, MasterCard and Visa, the three payment groups that originally developed the standard.

PIN Policy: Overload to bankers

To complete the requests for additional authentication, banks were loaded with thousands of requests and few allowed users to create passwords on their websites. Some institutions sent fresh user IDs and passwords to customers via post.

Some private banks like Citibank allowed its customers to use net banking password as their password for e-commerce transactions. Further, ICICI Bank has provided 6-digit PIN with a personal assurance message (PAM), which is a type of message and only known to the customers.

The largest public sector bank, State Bank of India said that it has already accommodated the required change, as its entire debit cards are PIN based, so they may not require another layer of security. Only, the customers have to apply for PIN for credit cards.

Benefits of new PIN Policy

1.    Additional security.
2.    Less number of frauds or default rate.
3.    Secure transactions.
4.    Increase in users’ confidence in the plastic money.
5.    With new PIN ID cards, holders could access new government and private sector services online using the PIN to verify their identity.

PIN for ID cards: Not such a sharp idea

1.     It cost the exchequer about $5bn project to provide additional chip and PIN capabilities to the present ID cards.
2.    Also, there are doubts over the practical benefits of the PIN number.
3.    Analysts predict that the system was also vulnerable, PIN numbers being spied on in public and to criminals hacking terminals to steal card transaction and PIN details. It means that PIN functionality could open up new avenues for identity fraudsters.