RBI relaxes 2-factor authentication norms for contactless cards upto Rs 2,000

The Reserve Bank of India relaxed the norms for the two-factor authentication requirement for small value transactions made through the Contact less cards upto the payments of Rs 2000.

Customers can now make payments up to ₹2,000 using NFC (near field communication) enabled credit and debit cards without punching the password at any retail outlet or while shopping online.

Features of the New Norms :

• Additional authentication would not be required for up to Rs 2,000 per transaction only using contact-less cards.
• The limit of Rs 2,000 per transaction will be the limit set across all categories of merchants in the country where such contactless payments will be accepted.
• Beyond this transaction limit, the card has to be processed as a contact payment and authentication with PIN (AFA) will be mandatory.
• Even for transaction values below this limit, the customer may choose to make payment as a contact payment, which has to be facilitated by both issuing and acquiring banks.
• In other words, customers cannot be compelled to do a contactless payment.
• These rules will not be applicable to ATM transactions irrespective of transaction value and Card Not Present transactions (CNP).
• A customer can now just wave the card before the PoS machines to complete the transaction.
• This new norms will promote Tap and Pay Electronic Payments.

Tap and Pay Electronic Payments :

• The ‘tap and pay’ refers to the use of near-field communication (NFC) technology, enabling users to make payments by waving or tapping the card near the contactless reader instead of swiping it.
• Customers may look for the “contactless” logo on the card as well as at the merchant location so that they can distinguish such cards from other cards available with them and also identify the locations where contactless payments are accepted.

Prior to this relaxation,

2-Factor Authentication : After tapping the card at a point of sale machines, the customer had to punch their PIN number as an additional factor authentication (AFA) to avoid any chances of fraud.

Contactless payment cards :

• Contactless payment systems are credit cards and debit cards, key fobs, smartcards or other devices that use radio-frequency identification for making secure payments.
• The embedded chip and antenna enable consumers to wave their card or fob over a reader at the point of sale.
• Transactions can be almost twice as fast as a conventional cash, credit, or debit card purchase.
• The first contactless cards were issued by Barclaycard in 2008 in UK.

Near field communication (NFC) :

1. It is a set of ideas and technology that enables smartphones and other devices to establish radio communication with each other by touching the devices together or bringing them into proximity.
2. Contact distance of typically 10 cm (3.9 in) or less.