New Measures to Strengthen Cross-Border Digital Payments
The Reserve Bank of India (RBI) has announced a significant enhancement in online payment security, focusing on cross-border “Card Not Present” (CNP) transactions. To ensure international digital transactions using India-issued cards are as secure as domestic ones, the RBI has introduced Additional Factor of Authentication (AFA). This decision comes in response to the increasing volume of online shopping and the growing risk of fraud.
Understanding Additional Factor of Authentication (AFA)
AFA is a security feature that requires multiple verification methods to authenticate a transaction. It was previously mandatory only for domestic digital payments. Common authentication methods under AFA include One-Time Passwords (OTPs) and biometric verification, which have significantly reduced fraud in domestic transactions, thereby strengthening consumer trust.
Why AFA is Necessary for International Transactions
With the rapid growth of e-commerce, Indian consumers are increasingly making purchases from overseas merchants. However, international transactions without AFA remain vulnerable to cyber threats due to the absence of physical card verification, increasing the risk of fraudulent activities. Recognizing this security gap, the RBI has extended AFA to international CNP transactions to provide better protection against financial fraud.
RBI’s New Security Measures
To enhance security, the RBI has proposed that cardholders undergo additional verification steps while making international payments. These may include:
✅ OTPs sent to registered mobile numbers
✅ Biometric authentication for added security
The RBI will soon release a draft circular seeking feedback from stakeholders before finalizing the implementation. This move is part of a larger initiative to improve the security of digital payments in India.
Framework for Digital Payment Security
Last year, the RBI introduced a digital payment security framework that mandates using a dynamically generated authentication factor for every online transaction, except for those involving physical card usage. The framework classifies authentication factors into three categories:
1️⃣ Knowledge-based authentication – Passwords and PINs
2️⃣ Possession-based authentication – Physical items like ATM cards
3️⃣ Biometric authentication – Fingerprints or facial recognition
Impact on Indian Consumers
The implementation of AFA in international transactions will provide Indian consumers with a security level equivalent to domestic transactions. This move is expected to boost confidence in cross-border e-commerce, encouraging more people to shop online from international platforms while ensuring stronger protection against fraudulent transactions.
🔹 Conclusion:
The RBI’s decision to extend AFA to international transactions is a significant step in making online payments more secure. By implementing stronger authentication methods, the central bank aims to safeguard Indian consumers from cyber threats while promoting safe digital transactions worldwide.
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