Extra security measure in payment gateway may curb e-commerce growth

The RBI directive will now introduce a new screen to the processing steps where the cardholder will have to type in the PIN/password that will be generated while registering under the "Verified by Visa" or "Master Card 3D-Secure" program. This additional step, claim industry pundits, will make the online transaction more cumbersome in a country where low bandwidth has already made e-commerce a time-consuming and tedious process.

Though the move will boost consumer confidence in the long term, it may cause a dip in transactions in the short term, because many online customers may be put off by the additional security measure.

According to Anupam Mittal, chairman and managing director of People Group, because of the additional security measures, e-commerce players stand to lose revenue to the tune of around Rs.2500 crore. "As a result, the exchequer may stand to lose up to Rs.300 crore in service tax," he added.

P.K. Thomas, COO of Cleartrip.com, one of the largest online sites for booking air-tickets, said, "Our inhouse survey results show that customers simply switch off if the credit card transaction takes too much time, or is a bit risky. All banks have not made customers aware of the issue and this might lead to a loss in business for the industry."

"On Cleartrip.com, when users were redirected for 3-D secure authentication, we noticed a 25 to 35 percent drop in payment completion rates," he added.

The Internet and Mobile Association of India (IMAI) has also criticized RBI's directive, saying that it should have been non-statutory in nature. "India does not even feature in the top 10 online fraud perpetrating countries, which account for 95 percent of online fraud reported worldwide. Online card fraud is mostly originating from international cards and not Indian cards," an IMAI statement said, pointing out that online fraud is just 0.16 percent of the e-commerce industry in India. According to the Internet Crime Complaint Center (IC3), the US and UK are the largest online fraud-perpetrators.