Mumbai: Last Thursday, when 30-year-old Rupesh Shah offered his credit card to pay for a Rs40,500, 32-inch LCD television set he bought at a Croma store in Mumbai, he was in for a surprise: The store asked him for proof of identity, a first for him.
Securing transactions: Identity proof may be required for purchases worth Rs7,500 or more at a jewellery store, Rs5,000 or more at a cellphone store, and Rs8,000 and above for buying electronic goods. Ramesh Pathania / Mint
The request for an ID proof is, in fact, part of a new drive by banks and payment processing firms such as Visa Inc. and MasterCard Worldwide to prevent the fraudulent use of credit and debit cards.
ICICI Bank Ltd, the country’s largest private sector bank and also the largest credit card issuer with around 8.5 million cards, has informed its customers that they might be required to prove their identity at merchant outlets (or stores) when they are making high-value purchases using a card. The bank has asked its customers to cooperate with the practice.
While most banks have asked merchants to ask for proof of identity when a customer makes a high-value purchase using a credit card, some have taken the onus of preventing fraudulent transactions onto themselves—with a little help from customers. For instance, according to Praveen Bansal, deputy general manager, transaction banking department, Union Bank of India, the state-owned bank has “written to all our credit and debit card holders to register their mobile phone numbers with the bank. For transactions over Rs500 on credit or debit cards, we send an SMS to the customer giving details of the transactions”.
While some customers are hesitant to produce ID card every time they make a high-value purchase using their cards, most have realized that this is a measure that seeks to protect them, too.
“We ask for an identity proof from people who make purchases of Rs7,000 and above on their credit or debit cards,” said Ravi Prakash Jha, store manager at an outlet of The Mobile Store in Mumbai, a chain that sells wireless phones and accessories. “Consumers are hesitant to show their identity proof, but they are cooperating with us because we tell them that this process will help prevent misuse of their cards.”
However, some consumers aren’t entirely convinced about the efficacy of the ID measure. “It’s a good way to prevent misuse of cards and avoid fraudulent transaction, but I feel that this is not a foolproof plan because it’s very easy for fraudsters to forge identity proof such as driving licence, and they can still misuse the card,” said Sandeep Tiwari, an accounts manager with a real estate developer who was asked for an ID proof when he bought a Nokia phone for Rs8,000 at The Mobile Store.
The definition of high-value transactions varies across banks and merchant establishments. Typically, “a customer will have to provide an identity proof for purchases of Rs7,500 and above at a jewellery store, purchases of over Rs5,000 at a mobile store and purchases of over Rs8,000 at an electronic showroom,” said an official with a payments processing company who asked not to be identified because he is not authorized to speak to the media.
IDBI Bank Ltd, for instance, has instructed merchant outlets to ask for ID proof from card users buying a product worth exceeding Rs10,000, according to C.S. Jain, executive director, head of personal banking group, IDBI Bank. “IDBI Bank debit card holders receive SMS alerts for any transaction over Rs10,000. These are the steps the bank takes to check frauds.”
As of 31 May, there were 48.42 million credit cards in use in India, with a total outstanding amount of Rs9,748.31 crore, the Reserve Bank of India (RBI) said in its July bulletin. The debit card base in the country at the end of May was at 283.58 million, and the spends on debit cards stood at Rs3,665.91 crore, the central bank’s data showed.
“The fraud to sales ratio in India is at 0.12 which means of every Rs100 spent 12 paise is lost,” said the senior official from a payments processing company quoted in the first instance. “The fraud ratio is not alarming. It has been stable at around 0.12 for the past two-three years, but to ensure it remains low, we have introduced this best practice.”
“Fraudsters usually rob cards and make purchases of electronic items and jewellery as they have resale value,” said a senior official with Axis Bank Ltd that has 600,000 credit cards and 125,000 point-of-sale (PoS) terminals. PoS terminals are machines that read credit or debit card information and approve or reject a transaction.
“Frauds are also rampant at curio shops, which are largely visited by tourists. Certain cities like Agra, Coimbatore and Chennai are places where card frauds are rampant,” said this person who did not want to be identified as he is not authorized to speak to the media.
In February, then minister of state for home affairs Shakeel Ahmad told the Lok Sabha that between April and December 2008, ICICI Bank had reported 8,280 cases of credit card fraud worth Rs11.47 crore to the RBI.
American Express Banking Corp. was hit by 703 cases in which it lost about Rs6.04 crore and 2,484 cases of fraud were seen by Hongkong and Shanghai Banking Corp. (HSBC) which lost Rs4.90 crore, Ahmad told Parliament. Among other foreign banks, Citibank incurred losses of Rs4.73 crore, Standard Chartered Bank, Rs2.39 crore and Deutsche Bank, Rs2.09 crore, all during the same period.