Monday, December 22, 2014

How 'small' is Expendable?

Few days back, my friend living in New York, got a call from his bank saying that a transaction of USD 4 using his credit card was pending approval as they wanted to check the same being used in a small town in Africa. They wanted to make sure that the transaction was indeed made by my friend since the location was different. When he responded in the negative, the bank assured they will block his card immediately and send him a new card.

After disconnecting the call, when he tried to check his card history via net banking, the card had already been blocked from the account! The bank acted so fast and did the blocking instantly that it thwarted this and prevented any further attempts.

 It is suspected that the data attack on the popular retail store whose database was compromised was the reason behind this potential misuse, as my friend has made many purchases with the retail outlet.

Things to be noted here are U.S banks do not have the Indian practice of One Time Password (OTP) and instant SMS for every transaction, while only a notification will be sent on the App.

But, they follow an appreciable practice to check with the customer on any suspicious transaction- in this case he was contacted as the transaction was made from a place much farther from the declared place of residence. Imagine even for that 'small' amount of $4 !! With this they were able to avert a potential fraud as it is very likely that in the event of this transaction for a small amount going through, the fraudster would have made an attempt for a much larger amount with the data in his possession.

In this context, it is to be noted that today it was reported in a social networking site that RBI is contemplating to remove the practice of sending OTP for 'smaller' transactions and would soon come out with details. With the increasing incidents of cyber frauds, this appears to be a retrograde step towards protection of customer interest. While it is fervently believed that RBI will reconsider this ill-advised move, in the absence of such robust 'live' cross checking practices followed in U.S, the central bank could also enlighten as to how a 'small' amount could be identified, in this land , where the poverty line is fixed at Rs 27 in rural area and Rs 33 in Urban area !

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