Debit Card Breach Could Dent PM Modi's Push To Go Cashless: Foreign Media

[GANESH65]

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India's quest to become a cashless economy has been dealt a blow by a data breach that compromised as many as 3.2 million debit cards.

Prime Minister Narendra Modi urged Indians in a radio address in May to use cashless payments to discourage corruption and keep track of money. Convincing them may get harder after India's national card payments network said that the data violation led to fraudulent transactions, mainly in China and the U.S.

The illegal withdrawals were limited to 641 customers of 19 banks, and the total amount involved was just 13 million rupees ($194,000), the National Payments Corp. of India said in a statement late Thursday. Yet the breach could reduce faith for cashless transactions in a country where Google Inc. estimates the digital payments industry will grow 10 times to $500 billion by 2020.


"Given that most Indians are in the villages and not tech savvy, there will be lot of apprehension regarding usage of digital money and cards after this breach," said VVSSB Shankar, founder of i-lend, India's first peer-to-peer lender. "This is a major setback for India's fight against the cash economy. Banks will have to increase security measures and improve efforts to educate people to tide over this."

Cash King
The South Asian nation has been aggressively pushing cashless payments, touting its so-called JAM mechanism that involves bank accounts for the poor, biometric identity cards and high mobile phone usage. About 98 percent of consumer payments are still made with cash, a report by PricewaterhouseCoopers Plc showed in 2015. That's even with 697 million debit cards and 26 million credit cards in the country at the end of July, RBI data show.

Customers needn't panic, A.P. Hota, managing director and chief executive officer of National Payments, said in the statement. Banks have advised customers to change their card security codes, and in cases where customers couldn't be contacted, have blocked their cards and are issuing new ones, the payments system operator said.

State Bank of India, the nation's largest lender, said in a statement that it had blocked the cards of certain customers as a precautionary measure. ICICI Bank Ltd. said it had changed codes of cards used at affected ATMs.

Defense Lines

"Banks have taken steps to isolate affected cards and accounts," said Tirthankar Patnaik, Mumbai-based chief strategist and head of research at Mizuho Bank Ltd. "Also, in India, the bank customer has two lines of defense: a mandatory shadow reversal in case the customer notifies the bank of a breach and deposit insurance in case of an irreversible loss."

The Reserve Bank of India August blamed an "unusually high and protracted" demand for notes and coins for slowing down the velocity of money, or the pace at which commercial lenders make fresh loans, which in turn become new deposits for the banking system and lead to further credit expansion.

Currency in circulation is more than nine times what it was 17 years ago. By comparison, China's yuan pile has increased less than sixfold, even though the mainland's economic expansion has outpaced India's.


C & P source :


http://profit.ndtv.com/news/economy...dis-push-to-go-cashless-foreign-media-1477276

 

[GANESH65]

In the wake of recent ATM fraud involving around 3.2 million debit cards, with State Bank of India, ICICI Bank, HDFC Bank, Axis Bank and few other banks blocking lakhs of debit cards dust seem to be settling down on yet another ATM heist.
It was only in 2013, when the largest ATM heist of $45 million happened. This heist involved cards issued by National Bank of Ras Al-Khaimahand Bank of Muscat. Money was withdrawn in space of few hours in two separate time periods from across several continents. It was reported that two payment processing companies in India were probably compromised. Lessons, however, don’t seem to have been learnt.
Shockingly in the current case there was a prior warning. National Payment Corporation of India in May 2016 had informed the banks about the possible malware induced breach in payment systems operated by Hitachi Payment Services. Nothing much seems to have been done except for Hitachi Payment Services issuing couple of statements indicating their systems as per reports of the auditors have no breach


.The mechanics of operations are fairly simple. ATM operations of banks are mostly outsourced to third parties who provide the machines and the software to run the same. As a person swipes the card, the details from the magnetic stripe on the card are read by the reader on the ATM machine. This provides basic account details and the corresponding bank identifications. After the card is read, PIN is entered to authenticate the transaction.
These third-party companies are provided a link to the bank systems wherein they get details of the bank accounts and PIN details of individual cards and also the limits on each card. These details are processed on the payment settlement system run by these outsourced companies and based on the authenticated details payments are made. Once the payment systems are compromised, card details, PINs, limits etc. all reach hands of scammers.
These details are used to make fake cards. These cards are then handed over to persons who withdraw money from ATMs many a times this operation happens in a coordinated manner across several countries.
As reported, withdrawals from china happened in the current case. While Hitachi Payment Services may maintain that its servers were not breached, as far as a citizen is concerned, he lost his money. Money having gone and software systems possibly facilitating it does appear to be a case of wrongful loss to citizen and wrongful gain by unknown persons. This clearly attracts section of cheating as per Indian Penal Code.
Role of the banks, who hired the services of these payment settlement companies and also those who certified this software to be free of bugs is also not beyond the realms of sections of criminal conspiracy in Indian Penal Code.
Case could be made out that the intermediaries, i.e. the payment settlement companies and the banks were themselves a victim. But negligence in safekeeping of citizen’s money surely is criminal and needs to be investigated.
Outsourced operations no doubt add to ease of business. They are, however, prone to fraud in absence of proper checks and balances. Cases like these raise concerns on whether there has been a criminal negligence on part of the parties concerned.
Criminal investigations in current case involving banks, software service providers and auditors who certify these systems will not only help prevent future frauds but also help the citizens to safely and securely enjoy hassle-free banking services in future.
The author is Currently Additional Director General Home guards, Mumbai and former Controller, Legal Metrology, Maharashtra.

Source:http://www.firstpost.com/business/a...anks-are-outrsourcing-negligence-3064274.html