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Security increases friction. That's not news. I've written a few blog posts - click here, and here - on this perennial tradeoff in payments.
However, I recently realized that security measures can actually cause new sources of vulnerability.
Ironic but true.
Since December 2013, India's central bank RBI has made it mandatory for all debit and credit card transactions at the point of sale to require PIN. This is in addition to signature, which has always been required for card present transactions. So, while some other nations are debating about "PIN or Signature", India has already enforced a "PIN and Signature" regime. But I digress.
In theory, PIN makes card transactions more secure. When implemented properly - as Europe did with EMV over a decade ago - PIN does reduce card fraud without a disproportionate increase in inconvenience.
However, when the same enhanced security measure is implemented in a half baked manner, it not only reduces convenience but increases vulnerability.
Friction from the RBI's latest mandate arises from the fact that most credit cards have 6 digit PIN numbers, which are more difficult to remember than standard 4 digit PIN applicable for debit / ATM cards.
Now, on the ground:
https://twitter.com/GTM360/statuses/413255102192168960
As a result, the purpose of PIN is defeated.
While things might improve in future, at this point the "PIN + Signature" regime has caused greater friction and increased vulnerability.
As an aside, the central bank apparently implemented this new security measure to provide more confidence to people to use their payment cards and thereby usher in a cashless society.
For more than one reason, we might be headed for exactly the opposite effect.
Ergo, RBI's recent mandate has rendered many credit cards unusable at the POS and it's back to cash for many customers.
How's that for "unintended consequence"?
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Ruchi Rathor Founder at Payomatix Technologies
06 September
Alexander Boehm Chief Executive Officer at PayRate42
05 September
Erica Andersen Marketing at smartR AI
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