Propelled by changing consumer habits and the rapid digitalization of financial services, India has seen a remarkable increase in credit card usage in the last few years. In February 2024, banks in India exceeded the issuance of 100 million credit cards, marking an increase of 1.1 million cards from the prior month.

This shift towards digital payments reflects a broader change in the consumer landscape, prioritizing ease, efficiency, and the benefits of rewards and credit facilities. However, this increased reliance on credit cards is matched with a parallel rise in fraud, presenting new challenges for consumers and authorities alike. The RBI’s report highlighted that the financial year 2022-23 saw frauds involving credit and debit cards climb to Rs 276 crore, up from Rs 119 crore two years earlier.

The Government of India, however, has been progressively leveraging technology to combat the rising menace of credit card fraud, reflecting a determined and multifaceted approach to safeguard its citizens in the digital payments arena.

The Bedrock: Mandatory Dual-Factor Authentication
The year 2016 marked a pivotal turn in India’s battle against credit card fraud with the mandatory introduction of dual-factor authentication (DFA) for all online payments. This move, requiring an additional verification step through a One-Time Password (OTP), added a significant layer of security, ensuring that the cardholder’s identity is verified before any transaction is processed.

The effectiveness of this measure led to its adaptation in 2019 for recurring online transactions, and notably, its extension to the Unified Payments Interface (UPI) transactions in 2020, fortifying the foundations of India’s digital payment ecosystem.

Empowering Users: Setting Limits and Transaction Controls
In a bold stride towards empowering consumers, the government mandated in 2020 that all debit and credit card issuers allow their users to set transaction limits and provide the functionality to block or unblock various transaction types – be it ATM withdrawals, point-of-sale (POS) transactions, online or international transactions.

This regulatory measure not only put power back into the hands of the cardholders but also significantly minimized the risk of unauthorized transactions, instilling a deeper sense of security and trust in digital payments.

Tokenization: A Leap Towards Securing Card Data
Perhaps one of the most forward-looking initiatives was the mandatory card-on-file (CoF) tokenization rule introduced in 2021.

By replacing sensitive card details with a unique digital token for online transactions, the risk of financial data being compromised is drastically reduced. This regulation signifies a leap towards minimizing the potential points of failure and exposure, ensuring that even if data breaches occur, the information obtained is practically useless to cybercriminals.

A Multi-Pronged Approach
The Indian government’s strategy against credit card fraud is notably multi-faceted, integrating legislative reforms, technological advancements, and consumer awareness programs. At the heart of this approach is the adoption of advanced technologies which have significantly enhanced the detection and prevention capabilities against fraudulent activities.

AI and ML technologies, serving as the vanguard of fraud detection, have been crucial in real-time analysis of spending patterns and flagging unusual transactions, thereby enabling banks and financial institutions to preemptively tackle potential frauds.

Simplifying the Reporting of Cyberfraud
Understanding that the battle against fraud is not just fought with preventive measures, but also with responsive actions, the Government of India has streamlined the process for the public to report cyberfraud attempts.

This initiative ensures that victims of cybercrime have immediate access to help and that authorities can swiftly respond to these threats, potentially preventing further fraud. The establishment of dedicated cybercrime portals and hotlines represents a critical step towards building a responsive and resilient ecosystem.

The Road Ahead
Under the aegis of the “Secure India” project, the government is making persistent efforts to curb cyber frauds. This project aligns with the broader vision of creating a secure cyberspace that safeguards privacy and ensures the integrity and availability of data.

This initiative is not just about fortifying defenses but also about fostering a culture of cybersecurity awareness among citizens, enhancing their ability to recognize and respond to potential threats. The “Secure India” project symbolizes a holistic approach, integrating technology, policy, and public engagement to build a resilient digital ecosystem.

Adding to the arsenal of consumer protection measures, the government also plans to introduce a revolutionary feature allowing the reversal of online payments above Rs 2,000 within a 4-hour window. This initiative is designed to combat the rising menace of cyber fraud by providing consumers with a critical period during which unauthorized transactions can be identified and reversed.

The introduction of this 4-hour window policy is a testament to the government’s agility in adapting to the dynamic nature of cyber threats and its commitment to safeguarding consumer interests in the digital age.

The Government of India’s approach to combating credit card fraud through technology is commendable, reflecting a deep understanding of the evolving cyber threat landscape and a proactive stance on consumer protection.

As we move forward, it’s imperative that these measures are continually revisited and refined, adapting to new threats, and leveraging advancements in technology. The journey is long, and the fight against cybercrime is relentless, but with initiatives like these, India is well on its way to creating a safer digital transaction space for its citizens.

(The author is Global Head, R&D, Giesecke+Devrient; Views are personal)