To enhance digital payment security, the Reserve Bank of India (RBI) has introduced a draft on “Framework for Alternative Authentication Mechanisms for Digital Payment Transactions.”

The Reserve Bank of India (RBI) is currently focusing on improving digital payment security and has highlighted the importance of using Additional Factors of Authentication (AFA) for transactions. Previously, there were no specific criteria for authentication.

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RBI in a press release on Wednesday (July 31, 2024) said, “The Reserve Bank of India has prioritised security of digital payments, in particular the requirement of Additional Factor of Authentication (AFA) for making payments. No specific factor was mandated for authentication, but the digital payments ecosystem has primarily adopted SMS-based OTP as AFA. While OTP is working satisfactorily, technological advancements have made available alternative authentication mechanisms.”

Further, the central bank highlighted that an authentication factor is any piece of information a customer provides to confirm their identity for making a payment. These factors are divided into three main categories:

Something the user knows: like a password, PIN, or passphrase.

Something the user has: such as a card or a software token.

Something the user is: like a fingerprint or other biometric information.

According to RBI, for most digital payments, an additional factor of authentication (AFA) will be required unless specified otherwise. Banks and other issuers can use a risk-based approach to decide the appropriate AFA, considering factors like transaction value and customer risk. They must also quickly inform customers about eligible transactions.

However, the following transactions that RBI has exempt from this requirement are as follows:

Small Value Contactless Payments: Card transactions up to Rs 5,000 at point-of-sale terminals.

Also Read: Ransomware Hits Over 300 Local Banks, NPCI Cuts Off C-Edge Technologies

E-Mandates for Recurring Payments: For mutual fund subscriptions, insurance premiums, and credit card bills up to Rs 1,00,000, and other categories up to Rs 15,000.

Utility Payments via Select Prepaid Instruments/NETC: Payments using specific prepaid instruments and transactions in the National Electronic Toll Collection (NETC) system.

Small Value Offline Payments: Transactions up to Rs 500 made offline.

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