Tuesday, September 30, 2008

Your mobile phone may soon be able to be used as credit, debit card

New developments are being done in the mobile sector. With the latest development there can be complete liberalization in the mobile commerce, the department of telecommunication (DoT) will soon be putting forward an application to the Reserve Bank of India (RBI) for seeking guidance on linking telephone networks with banking services.

Recently RBI outlined certain guidelines for mobile banking in India, under which it has allowed only a few basic banking services which can be undertaken through mobile phones. But as per new DoT move the consumers will virtually be able to use their mobile phones as a debit or credit card.

Sources informed Sunday ET that the ministry will ask for RBI's consultation to provide full-fledged mobile banking services to the customers, as per discussions held between the 13th Finance Commission team and DoT officials on September 18, 2008. As per a senior DoT official, the ministry up till now has not taken up any program on linking telephone networks with banking services, but is eager on it as it will help in generating revenues, besides giving more value to telephone customers. "These services can increase the share of value-added services from the existing 7-8% of total revenues from the sector to almost about 25% which is the case in the developed countries," DoT said to the Commission's team. Sunday ET has been provided with a copy of the discussion paper prepared by DoT.

Shetty, director at KPMG India, while explaining how the new initiative will help Indian consumers, said it will change the entire face of banking in the country. "So far, consumers can make only a few basic transactions through the mobile, but this will mean using your mobile as your credit or debit card. All you have to do is to send a message to make a payment,” he said.

In India mobile segment is primarily limited to basic banking transactions, purchase of travel tickets and payment of some utility bills, checking your account balance and last few transactions. Sanjiv Mittal, vice-chairman, Bharti Telesoft, is providing mobile banking facility to the customers in collaboration with Barclays Bank think that both, banking and telecom industry, will have to come together to make mobile commerce a success in India. "There are certain laws to be considered regarding money remittances. Considering the IT security condition, coming together of both is a good sign," he said.

Vodafone is also offering services like querying bank balance, requesting for cheque book, making stop payment etc. These services are being provided in association with banks such as HDFC Bank, ABN AMRO and Kotak Mahindra Bank. "Mobile banking is necessary to create access to the remotest of areas. Any kind of convergence is good for promoting mobile commerce. There is nothing better than both the systems coming together to provide a framework," said a Vodafone official.

The DoT's interest in the subject is sending positive signals to industry. "If the ministry takes up the matter with the RBI, it will definitely speed up the process. It will not only help the mobile users but will boost banks and even mobile operators to grow further," added Mr Shetty.

The DoT has informed the Finance Commission's team that revenues from auction of spectrum for 3G and BWA services approximately can go up to Rs 30,000 cr. The 13th Finance Commission has asked the DoT to give the revenue details from the telecom sector between 2010 and 2015.

Monday, September 15, 2008

State police arrested city’s first credit card ‘skimmer’

Ahemdabad police arrested Kalpesh Patel for credit card frauds worth Rs 1.5 lakh, though police believes that the fraud amount is much bigger.

Kalpesh is a young corporate executive who did purchases at a prominent departmental store on the SG Highway and made payment by credit card for his purchases worth Rs 5,000. By chance, the credit card swipe machine went offline and the transaction was completed to avoid customer inconvenience.

Much after the customer left the store the credit card company realized that they have been cheated. The CVV number used to complete purchase through credit card proved to be fake! Many more fake transactions were done in July, August and even in September and the card swipe machine would be always on the blink.
Satellite police station officials have finally caught the credit card fraudster. He turned out to be 32-year-old, Kalpesh Patel. Satellite police station officials told Kalpesh has been sent to judicial custody on Monday. He was interrogated by police officials and private sector major bank employees to know how he did it.

The cops are now more worried about the technique used by the fraudster. "Kalpesh could actually make the card swipe machines go offline. It is still not clear how. In the online mode, the machine sends transaction information, real time, to the central server which keeps a watch over all transactions simultaneously. Being offline, this interaction with central server did not take place and thus Kalpesh could make the purchases even with a wrong CVV number," said the police officials.

A private bank detected fraud when there was periodical ‘failure’ in the swipe machines of the credit card in several joints including petrol pumps, restaurants and shopping malls. The bank on further investigation found that the cards were used by impersonators.

"The transactions varied from Rs 300 to Rs 5000. As the amount was not very alarming, few of the card owners realized the fraud. In the primary investigation, we came to know that around 11 cards were misused in this fashion," said a Satellite police station official.

JJ Patel, inspector of Satellite police station, told TOI press person that Kalpesh has been booked for criminal breach of trust and fraud and forgery. Cop informed that he has been sent in judicial custody on Monday. "We have called upon experts to understand his modus operandi. As per primary information, he procured credit card database in electromagnetic format and copied it to some other credit cards. He then used these duplicate cards to make purchases," Patel said.

Police suspect there might be more people involved with Patel in this racket. "We are hunting for those who provided him the credit card details of other users, who him the know-how for making duplicate cards and making the swipe machine go offline," said police investigators.

The technique of credit card transaction

Usually swiping machines are connected to a leased line working on GSM or CDMA technology. The telephone line connects the machine to the main server of the bank and the service provider - Visa or Master Card. When credit card is swiped, the machine sends the information to the server that verifies the transaction. If the online mode is not available, the establishment can use offline mode after inserting three digit CVV code. Mostly the offline mode is used only for customers' convenience. In case of offline mode, the data is then sent to the server when the machine is back online.

Thursday, September 11, 2008

Corporation bank in tie-up launched prepaid travel card

Corporation bank, Mangalore-based public sector bank has launched prepaid travel card in a tie-up with JP Morgan and Visa. Bank has used JP Morgan’s expertise in prepaid card solutions and its proprietary technology platform. Bank has launched the card in three foreign currencies -- US dollar, British pound and Euro. Corporation Bank has become the second public sector bank, for launching a prepaid travel card, earlier only State Bank of India had launched a prepaid travel card.

Bank is offering the benefits like customers to make a purchase, withdraw cash in local currencies at ATMs when traveling abroad. The card will also be easy to carry and lower the risks of carrying foreign currency and travelers' cheques, B R Bhat, general manager, Corporation Bank said. He said the customers can get the balance amount in the card refunded at any of the designated branches of the bank.

The bank has planned to sell at least 25,000 cards during the first year of its launch. Very soon bank is planning to introduce the card in Chinese currency also..

Sunday, September 7, 2008

RBI reports show increase in credit card spending in 2007-08

According to the latest data released by the Reserve Bank of India (RBI) there has been increase in the card transactions both debit and credit. The number has increased by 42 per cent to Rs70,459 crore during 2007-08. One of the reason for the rise in card transaction can be large number of banks are issuing plastic cards and merchant acquisition business also scoring well with the coming up of retail

By looking at the figures released by RBI clearly testifies that growth in plastic money has gone much higher than the 24.51 per cent as recorded in 2006-07. This is because people have started adapting themselves to banking technology, and, moreover banks are also encouraging the use of cards on account of the lower per-transaction cost.

Plastic money is convenient to carry than cash, but with the ramping up of ATM networks for both cash and non-cash transactions, and the propagation of merchant acquisition points across the country by both new organized retail and traditional retail merchants, card transactions has acquired wider acceptance. In addition to this banks are offering incentives such as cash-back schemes and discounts at certain retailers to popularize the use of plastic money.

Unlike the credit card, use of debit cards is more preferable to the banks as it ensures that more cash stays in customer's accounts. Moreover the card ensures fewer visits to the branch, since most of the account functions such as cash deposit / withdrawal, cheque deposit, ordering cheque books and statements, and even funds transfers can be carried out via ATM. Also, use of cards is more cost effective for a bank, rather than service him at a branch.

According to RBI's data even the number of cards issued has increased by 46.7 per cent to 88.31 million as of March 2008, in comparison to 60.17 million at the end of financial year 2006-07.

There has been increase in the credit card outstanding also. During 2007-08, the total credit card outstanding has risen to 43.6 per cent to Rs 5,843 crore. Till May 23 this year, the outstanding has gone up by 87 per cent to Rs 12,375 crore. In 2006-07, the value of credit card transactions has also gone up by 22.06 per cent.

Another reason for the increase in the use of plastic money is the growth of e-commerce and transactions via the Internet. Booking of airline and railway tickets have added to this segment, and, more and more people use cards as a payment mechanism for utility services.

Bankers are of view that debit card usage can outshine credit card usage mainly because of convenience, which is a primary factor for the adoption of plastic money. Besides, unlike credit cards, borrowings / loan from the bank is not attached to debit cards and in general debit cards do not need a credit review before they are issued, this makes them ideally suited for a larger population of the banked public.

Wednesday, September 3, 2008

LIC to launch its credit card in October

The senior divisional manager Bhausaheb Gujar in a press meet at Nagpur told the reporters in October Life Insurance Corporation of India (LIC) will be launching its credit card.

Speaking at the occasion of LIC’s 52nd anniversary Gujar said that LIC is working on the plans of finalizing the partner and there is possibility it would be introduced in the next month. However he declined to disclose the name of the partner.

Earlier there were reports that LIC is thinking of launching the card in association with GE Money.

He stated, ''We were in negotiations with a firm, but the deal could not be finalized for some reason. We are now negotiating with another partner, and the talks are in final stages. In all likelihood, LIC's credit card will be launched in October 2008''.

Gujar informed by the next year LIC, will start accepting premium through credit cards and currently it is procedure of completing formalities.

''Hopefully, premium payment will start by the next financial year,'' he said.

Meanwhile the insurance giant has authorized Corporation bank and Axis Bank to accept premiums from those who are having account in their banks.

He told that policyholders can use internet, electronic clearing g service, automatic teller machines (ATMs) of Corporation Bank and Axis Bank, online collection at Axis Bank branches and LIC's portal for paying their premiums.

He informed LIC recently has introduced the SMS facility for payment of premium, at present this facility is available for account holders of Corporation Bank only.

Recently LIC has added 375.90 lakh new policies, which collectively assure the sum of Rs2,75,457 crore during the financial year 2007-2008. He added the first premium income attained during the period was Rs43,812 crore.