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3-D Secure 2.0 – Making transactions Simpler and Safer

Preventing fraud plays a significant role in the digital payments space. We must have encountered many frauds, both online and offline, during our lifetime.

 

Unfortunately, the search for effective methods to eradicate fraud never ends. Fraudsters will always find new methods to commit crimes. There are many tools available to end the same, the latest one being 3-D Secure. 

 

What is 3-D Secure?

 

Putting it simply, 3-D Secure is an additional layer of cardholder authorisation added to an online transaction. VISA and Mastercard offer this tool, and it is known as ‘Verified by Visa’ and ‘MasterCard SecureCode,’ respectively.

 

3-D Secure is a three-sided security system that provides security while performing transactions and transferring payment data amongst 

 

  1.     Issuing Bank
  2.     Acquiring Bank
  3.     Payment Gateway (link that connects acquirer and issuer)

 

How does it work?

 

Several steps are involved when conducting an online transaction. A few additional steps for 3-D Secure can significantly reduce the risk of online fraud:

 

  1.     A cardholder enters payment information on a webpage
  2.     Payment provider sends request to check whether 3-D Secure technology is active
  3.     If Yes, the customer is redirected to the 3-D Secure page
  4.     The cardholder who receives the OTP must enter it in the appropriate field
  5.     The result comes in the form of a response to the server of the payment provider
  6.     The payment provider sends data to the acquiring bank
  7.     The acquiring bank authorises the transaction and informs the customer whether the transaction was successful or not

 

3-D Secure 1.0 v/s 2.0

 

3-D Secure 2.0 is replacing 1.0 to provide a better user experience, which will eventually lead to successful transaction conversion. The need to enter static passwords is replaced by other methods such as biometrics in 3D Secure 2.0.

 

3-DS 2.0 examines over 120 data points. If the transaction is deemed low risk, no further action is required; if the transaction is deemed high risk, 3D Secure requires customers to verify their identity through biometrics or two-factor authentication.

 

Benefits of 3-DS 2.0

 

With the 3-DS 2.0 update, customers will have a more fluid experience when conducting transactions on both mobile and desktop/laptop devices. Benefits of the latest update are:

 

  1.     Better User Experience
  2.     Increase in Online transactions
  3.     Higher conversion rates
  4.     Multiple Device support

 

Conclusion

 

Security is of the utmost importance, especially when customers conduct online transactions. Today, there is a significant shift toward online transactions, and customers must have mental comfort while making these transactions. 3-DS 2.0 makes the transactions safe, seamless and efficient, while also providing a better user experience.

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Will the internet-free digital payments UPI Lite take off in India?

What is UPI Lite?

 

The National Payments Corporation of India (NPCI) is working on a new solution called UPI Lite that will allow small digital payments to be made without the need for an active internet connection. The RBI announced on January 5 that digital payments of up to 200 could be made without an internet connection.

 

How does it work?

 

UPI Lite will allow feature phone users to use their phones to connect to UPI networks and make digital payments directly from their bank accounts. There are currently two key solutions being evaluated. The first is a SIM Overlay, while the second is a software-provisioned solution that will use Over-the-Air (OTA) updates.

 

SIM Overlay is a technique that extends a phone’s SIM card’s capabilities, allowing payments and other services to be completed even when there is no data connection. On the other hand, OTA will deliver the solution straight to the device’s firmware.

 

Users will be required to create a 4-digit or a 6-digit pin, depending on the protocols implemented by their banks. Payments made via the SIM overlay technique will be routed through the NPCI’s UPI system to servers operated by the NPCI, and transactions will then take place over the standard UPI network. Instead of using the internet, the entire procedure will run over SMS networks.

 

How does it affect the Indian ecosystem?

 

Since the demonetisation of banknotes in 2016, India has experienced a surge in digital payments. According to a survey, tier-II and -III cities in India accounted for more than half of all online transactions in the quarter ending March 2021. In villages and towns, though, cash still reigns supreme.

 

According to an industry expert, an alternative, secure, low-cost mode of payments with a near-cash-like characteristic will be provided by small value offline mode for digital payments, improving consumer confidence as a preferred option for small retail payments. It has the potential to promote various creative retail payment use cases, such as tickets, product bundling and non-standardised pricing.

 

Given that feature phones still account for half of the market, this will improve payments in areas where internet penetration is low.

 

This is not the first time the NPCI has attempted to promote offline payments in rural areas. In 2012, it launched UPI-led offline payments over Unstructured Supplementary Service Data (USSD) networks. However, due to SMS charges, it failed to take off in a large way. 

According to NPCI data, the USSD system was used for transactions worth 1.21 lakh in 2021. Around 83 banks were using the USSD system as of December 2021.

If NPCI’s current experiments go as planned, about 350 million feature phone users in India will be able to make digital payments without the need for an internet connection.

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Assisted Commerce – Accelerating the growth of Digital Payments in India

India’s e-commerce sector has grown significantly over the past few years and is expected to grow multifold in the coming years. The growth has been driven by increasing internet penetration, rising smartphone adoption, and the growing popularity of online shopping among consumers. The D2C and B2B segments have seen significant growth due to the increasing popularity of online marketplaces, making it easier for businesses to reach customers directly and for buyers to find a wider range of products at competitive prices. The projected growth of the D2C market to US$ 60 billion by FY27 and the overall e-commerce market to US$ 350 billion by 2030 highlights the tremendous potential of the sector in India (according to a recent report published by e-commerce enablement platform Shiprocket in collaboration with CII)

 

Further, India has seen a boom in smartphone penetration as well as tremendous growth in digital transactions. The number of internet connections in 2021 saw a tremendous growth to 830 million, driven by the ‘Digital India’ programme and the digital transactions in January 23 were close to (in terms of value) INR 12.98 Lk Cr (according to the latest TRAI data).

 

Given an understanding of the low adoption of mobile penetration in rural areas, assisted commerce was born and is now a full-fledged huge business opportunity for the commerce industry.

 

The assisted commerce industry is growing rapidly, driven by several factors, including the increasing popularity of mobile messaging apps, the rise of voice assistants, and the growing demand for personalized and seamless shopping experiences.

 

One of the key benefits of assisted commerce is that it allows businesses to provide 24/7 customer service, without the need for human customer support staff. This can help improve customer satisfaction and reduce costs for businesses.

 

Assisted commerce is also helping businesses to improve their customer engagement and loyalty by providing personalized recommendations and targeted marketing messages.

 

Imagine a situation where an individual may require support to make online purchases or conduct transactions- What started as kiosks in tier–3, 4, 5, and 6 towns and villages to help people navigate online government services and promote financial inclusion created a whole new business model.

 

The goal of assisted commerce is to enable individuals to participate in the digital economy and make purchases independently, by offering some level of assistance.

 

Assisted commerce can take many forms, depending on the individual’s needs and abilities. For example, helping individuals in rural areas to navigate online shopping platforms, bill payments, and train and bus ticket purchases. Alternatively, it may involve support staff or caregivers assisting individuals with shopping in physical stores or conducting financial transactions.

 

Assisted commerce is important because it can help promote independence and autonomy for individuals who may otherwise face barriers to participating in the new economy. By providing the necessary support and assistance, individuals with disabilities or the elderly can have greater control over their finances and make purchases that align with their needs and goals.

 

On this, Prepaid cards can be a very useful tool, as they offer a way for caregivers or support staff to manage and monitor the individual’s spending while still allowing them to make purchases independently. Many prepaid card programs offer features specifically designed for assisted commerce, such as cardholder and caregiver controls.

 

Some examples of the types of transactions that can happen via Assisted Commerce:

  1. Online shopping: Individuals who require assistance to navigate online shopping platforms may receive help from caregivers or support staff to browse products, compare prices, and make purchases.
  2. Bill payments: Individuals may require assistance with paying bills (utility/mobile/etc), such as by helping to navigate online payment platforms
  3. Banking transactions: Individuals may require assistance with banking transactions by making deposits or withdrawals at a bank branch or through online or mobile banking platforms.
  4. Direct money transfers can also be facilitated with the help of assisted commerce. This can involve using a variety of payment methods, such as bank transfers, wire transfers, or mobile payment apps.

 

We at CARD91 can play an important role in facilitating assisted commerce by providing innovative solutions that will be easier for businesses that may have limited access to banking services. If you’ve any use case, particularly on Assisted Commerce, you may write us at sales@card91.io

 

Written by Khushboo Bakhru, Senior Manager – Partnerships & Sales

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Secured Credit Cards – A Credit Score Builder Product

Over the past few years, India’s credit card sector has experienced remarkable growth, boasting nearly 98 million active cards and transaction volume reaching 323 Million in December 2023. Projections suggest that this figure could grow to 190 million cards by 2027, driven by a burgeoning affluent class. Despite this impressive growth, a crucial question looms – is the current credit card penetration rate of 3.5% or projected rate of 7% by 2027 enough? Can we extend the benefits of credit cards to the aspirational class and achieve a card penetration rate of 10% of the population ?

The Indian economy, on its upward trajectory, is expected to witness sustained growth, propelled by rising disposable incomes and an expanding middle class. RBI statistics reveal approximately 98 million active cards, with a monthly spend of INR 1,655 billion in December 2023. Key drivers of this growth include the increasing preference for cashless transactions, enticing rewards programs, the allure of a free credit period, and the synchronisation of repayments with salary receipts. Urban areas, in particular, are witnessing a shift towards credit card usage for transactions, thanks to the proliferation of e-commerce and mobile payments.

A recent report by Goldman Sachs titled “The Rise of Affluent India”, expects that 100 million Indians will be earning US$ 10,000 per annum by 2027. This set of people can easily take the number of cards to 200 million and a card penetration rate of 7% by 2027. And this is a great opportunity for Issuers to expand their customer base and increase usage. However, should we stop at 200 million? How about “The Aspiring Indians”? The rapid pace of digitalization has opened up the doors for Issuers to reach a larger customer base and offer innovative products and services. If done correctly, India can issue cards to 10% of the population by 2027.

Growth of Credit Cards from FY2017 to FY2023 with Estimates until FY27 :-


Source: RBI Data

However, the journey towards a higher penetration rate faces challenges. Key challenges include lack of distribution channels for credit card issuers to broaden their customer base and dissemination of information about the benefits of credit cards. A significant hurdle is the prevailing high rate of credit card delinquencies in India, reflecting a lack of awareness among consumers regarding the importance of timely payments and credit score management.

Addressing these challenges requires innovative solutions, such as the issuance of secured credit cards. This product empowers new-to-credit customers to build their credit history and scores by providing security in the form of Fixed Deposits or Gold, culminating in a credit card with a free credit period and generous rewards and offers. Smaller banks, in collaboration with fintech partners, are likely to spearhead this revolution, gaining assets and liabilities without straining their balance sheets.

Some of the strategies that issuers can use for increasing usage of secured credit cards are:

  • A wider geographical and demographic reach: Go beyond urban areas by partnering with local banks, non-banking financial companies, and other organisations to offer credit cards to customers in rural areas.
  • A sharper focus on Digital Channels: As more consumers in India become digitally savvy, credit card issuers need to focus on digital channels to reach potential customers. This includes using social media, mobile apps, and online advertising to promote secured credit cards and educate consumers about the benefits of using them. The journey of applying for a card, KYC, creation of FD, lien marking, and card issuance has to be seamless.
  • Innovative Product offerings: Differentiation by way of tailor made products for different segments, co-branding, innovative rewards, etc.
  • Awareness and consumer education: Increase awareness campaigns to help consumers understand the benefits of credit cards and how to use them responsibly. The key benefit to be propagated is that timely repayments can help create and / or to improve their credit scores.

Amidst technological innovations and a burgeoning economy, credit card issuers have a great opportunity in front of them. Through strategic initiatives and consumer-centric approaches, they can fortify profitability, catalyse digitalization, and provide consumers with a secure avenue for transactions—a pivotal step towards realising India’s digital future.

 

Authored by Amit B. Shah, Chief Business Officer at CARD91

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