Recommendations of the Gowri Mukherjee Commttee of RBI submitted on 2nd June 2011

Recommendations of the Gowri Mukherjee Commttee of RBI submitted on 2nd June 2011

(Copy of Full Report is available here)

The following are the recommendations of the Working Group:

1. Strengthening the existing Payment Infrastructure & Future Proofing the system

The first step prior to implementing additional controls and authentication would be strengthening the existing payment infrastructure by securing the technology infrastructure, improving fraud risk management practices across all stakeholders, and strengthening merchant sourcing process.

Towards this, the following would be important technical and process changes for the industry to make over the next 24 months:

S. No.	Actionable	Implementation Timelines
Improving the basic infrastructure
1	All acquirers and issuers may put in place adequate fraud risk management systems and processes	12 months
2	All acquirers to adhere to the merchant sourcing norms envisaged in the report	12 months
3	All acquirers may implement UKPT / TLE	12 / 24 months
Future Proofing the System
4	Acquiring infrastructure should be commercially ready to accept PIN for transactions. POS Infrastructure to also support EMV Chip Card reading	24 months
5	Issuers to ensure EMV readiness from a technology perspective	24 months
6	In case UID based biometrics is adopted as the second factor, then the acquiring infrastructure (ATM & POS) should be enhanced to accept Biometrics	36 months
7	Ongoing monitoring of fraud trends	To commence right away

2. Introducing an Additional factor of authentication:

Debit Cards. Also includes fully prepaid (Open) Cards

Debit Cards	Actionable	Implementation timelines
Debit Cards – Domestic
1	Aadhaar roll out evaluation: MSD + Aadhaar Biometric could be considered as an alternative to EMV +PIN if UIDAI is able to meet authentication requirements of card payments at POS and ATM.	Evaluation in 18 months time
2	All debit card transactions to have a PIN as an additional factor of authentication at POS.	Complete in 24 months. Start date to tie in with acquiring infrastructure readiness to accept PIN
3	If the decision is not to adopt biometric Aadhaar authentication, then migrate to EMV + PIN. If decision is to adopt biometric Aadhaar based authentication, overall industry implementation timelines is likely to be lesser than EMV roll out timelines. For issuers who migrate to EMV prior to implementation start date, decision to support Aadhaar authentication would be issuer call. Overall industry migration timelines to be ascertained as part of the Aadhaar evaluation.	EMV +PIN: Roll out to commence in 36 months and to be completed within 4 years from there on. MSD+Aadhaar: Start date to tie in with acquiring infrastructure readiness to accept biometric authentication and to commence by 36 months
Debit Cards – International
4	EMV Chip Card & PIN to be issued when at least one purchase is evidenced on their card in a foreign location	24 months

4. Introducing an Additional factor of authentication: Credit Cards

Credit Cards	Actionable	Implementation timelines
Credit Cards – Domestic
1	Aadhaar roll out evaluation: MSD + UID- Aadhaar Biometric to be evaluated as an alternative to EMV+PIN, if UIDAI is able to meet authentication requirements of card payments at POS and ATM.	Evaluation in 18 months time
2	If the decision is not to adopt biometric Aadhaar based authentication, then migrate to EMV + PIN: If decision is to adopt biometric Aadhaar based authentication, overall industry implementation timelines is likely to be lesser than EMV roll out timelines. Overall industry migration timelines to be determined at the time of Aadhaar evaluation. For issuers who migrate to EMV prior to implementation start date, decision to support Aadhaar authentication would be issuer call.	EMV Chip Card and PIN to be issued to all new and renewal card customers by beginning of year 3. 70% of all cards to move to EMV Chip Card & PIN by end of year 4 100% of cards to move to EMV Chip Card & PIN by end of year 5 MSD+Aadhaar: Start date to tie in with acquiring infrastructure readiness to accept biometric authentication and to commence by 36 months.
Credit Cards – International
4	EMV Chip Card and PIN to be issued to customers who have evidenced atleast one purchase using their card in a foreign location	24 months

IMPORTANT: Based on fraud trends, the migration timeline / approach might vary

Some emerging Technologies to consider in the long run

One of the options available for payment ecosystem players to consider is Contactless smart cards . This of course will come about once the acquiring and the issuing ecosystem evolves and stakeholders start seeing the merit and the commercial viability in investing in a technology like this.

Transit payments (metro rail, buses, toll), Loyalty applications and Micro-transactions might accelerate the move to contactless cards in India. Contactless transactions are known to be significantly faster and more efficient than magnetic stripe / contact cards.

Multiple applications -- ID, access control, debit, credit, transit, toll, e-purse, egovernance could all be based on such contactless cards. There could be varied uses for this e.g. allowing microtransactions (up to say Rs 1000) to be executed without a PIN

According to Juniper Research, by 2013, one in five smart phones in the world would have Near Field Communication (NFC) capability. NFC is also available as a Micro SD card /sticker. Once the acquiring infrastructure and ecosystem is built for contactless, the same could be seamlessly migrated to NFC.

In India, we could have contactless cards for a large section of the population which cannot afford an NFC phone. The others might migrate to the cardless convenience of the NFC phone.

(Copy of Full Report is available here)

P.S: The recommendation number 3 is not available on the RBI site

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