After increasing the limit on mobile wallet spends, RBI has now eased card payments by removing the two-factor authentication for online card transactions involving sums up to Rs 2,000.
The move aims to simplify and encourage electronic payments adoption at a time when the country is battling a cash crunch following demonetization of high-value currency.
While the move will give a boost to card adoption and transactions, mobile wallet companies might see a slight decrease in the usage as wallets, unlike cards, need to be refilled periodically.
Mobile wallet companies, however, say that it would attract more people towards cashless transactions and this coupled with the surge post demonetization will just accelerate digital payments in the country.
“In India, the number of bank card holders and users differ significantly and this step will help close this gap. This will further boost online payments and card acceptance infrastructure. In the past few weeks, we have seen a surge in usage of many digital payment platforms, be it wallets, cards or netbanking. The Government of India’s commitment towards achieving a cashless economy is visible in such steps that further promote digital payments. These are remarkable times for the payments industry in India,” said Chief Operating Officer, MobiKwik, Mrinal Sinha.
Corroborating the though, CEO of FreeCharge, Govind Rajan said, “The recent move is laudable and it will make it easier for interested users to use their credit / debit cards for online transactions. This will greatly improve the success rate of online transactions, which will grow both online commerce and cashless payments in India.”
Currently, any online transaction involving a card requires users to first enter card details on the merchant’s payment gateway, wait for a one-time password (OTP) to be sent to their mobile phone, and then use this number to complete the purchase.
This relaxation of the second factor authentication has been one of the long standing demands of the industry. In India, bulk of the online transactions are under Rs 2000 and the SMS based OTP process not only slowed down the transactions speed but also led to payment failure in the case where users were in bad network zones and could not receive the text SMS.
However, the new move is an opt-in service, which means that consumers will have to specifically opt for it. The card issuing banks will offer the payment authentication solutions to the respective card networks to their customers on an optional basis. Customers option for this facility will go through a one-time registration process requiring entry of card details and AFA by the issuing bank.
Since demonetization, India has witnessed a massive surge in the use of digital wallets. For instance, the percentage of the first time users of FreeCharge has seen a massive 15X surge, which effectively makes every fourth consumer loading FreeCharge wallet a first time consumer.
Similarly, MobiKwik recently said that the company has seen a 150 per cent jump in its merchants base since the Government’s announcement of demonetizing Rs 500 and 1000 currency notes. From a 100,000 merchant base in the pre-currency ban, the company has seen an addition of new 15,000 merchants already and now has a network of over 250,000.
While Paytm, India’s largest mobile payments and commerce platform, has been witnessing over 7 million transactions worth Rs 120 crore a day, helping it cross US$ 5 billion GMV sales, four months ahead of its target.
Earlier this month, RBI even increased limits on mobile wallets spend to Rs 20,000 for users and to Rs 50,000 for merchant bank transfers, further giving a boost to digital payment adoption in India.