RBI relaxes two-factor authentication for debit card transactions under Rs 2,000; but it won’t work on Uber

The Reserve Bank of India yesterday announced that two-factor authentication won’t be necessary for plastic transactions below Rs 2,000. This led many users to believe that they would finally be able to link their cards again on services like Uber. But that isn’t the case.

The new RBI guidelines relax the two-factor authentication process for small transactions valued under Rs 2,000. However, this relaxation is only for cases where the card is present and specifically for the new contactless NFC cards some banks have recently issued. With these cards, users don’t have to insert their card into the machine and just need to tap it to make a payment.

Uber, on the other hand, falls under card not present situation, where the credit or debit card is not physically present and the details are stored online with the service provider. The RBI has not made any relaxation for such situations. Earlier, the RBI had issued a draft circular to get suggestions whether it should relax additional factor authentication for small value transactions. This is the final circular, which means services like Uber will have to continue with mobile wallet or even cash payment solutions.

Last August, the RBI mandated Uber to implement two-factor authentication on its app for credit card transactions in India, which was the law in cases the credit card was not physically present at the time of transaction. In such cases, users are directed to another authentication website where they are required to either input a pre-defined password or request for a one-time password, which is delivered as an SMS on the registered mobile phone number.

In cases where the card was present, users have to input a PIN number as a second authentication before the transaction could be complete. Uber was trying to use a loophole that allowed companies outside India to go through online transactions without two-factor authentication. After calling the two-factor authentication cumbersome, Uber tied up with Paytm to use its mobile wallet and to fall in line with RBI’s guidelines.