This is a recent news. Two big private sector banks of India -
1) ICICI Bank – the largest private sector bank, and
2) ING Vyasya Bank – a bank promoted by ING group of Dutch land and Vysya bank.
have been fined heavily for not maintaining KYC details of customers as per guidelines of the Central Bank. The Reserve Bank of India has been very strict these days on defaulting banks. ICICI Bank has been fined Rs.30 lakhs while ING Vysya Bank has been fined Rs.55 lakhs. This comes equivalent to USD 56,000 and USD 103,000 respectively. May be these banks have been given warning earlier for not adhering to KYC norms. A detail of this notice has appeared on RBI’s website.
These penalties were for “failure to obtain adequate documents for opening accounts, failure to carry out sufficient customer identification procedures, failure to examine control structure of entities, failure to ascertain the identification of natural persons behind entities, failure to carry out effective enhanced due diligence, failure to carry out appropriate risk categorisation and delay in filing the suspicious transaction reports,” RBI said.
In one of my previous post, I had categorically mentioned why KYC norms are important and why the banks have to follow these norms strictly. However, some banks do not take care of these important guidelines seriously and maintain their records very casually. A well informed KYC details help law enforcement agencies to control money laundering cases as well as for tracing the criminal act of funding to terrorists organizations. You can revisit the previous post here:
The RBI penalty may be a lesson for those defaulting banks, who have still to follow the guidelines. The KYC norms are increasingly becoming standards to maintain customer’s record. Not only banks, but other financial institutions also have to maintain KYC norms and adopt best practices. It is in the best interest of the nation, customers as well as the banks.
If we refer to two years old story, during first half of the year 2010, Bank of Rajasthan(BOR) was also fined Rs.25 lacs for not maintaining proper records and misrepresentation of documents. Crisis was averted after RBI given its permission to merge BOR to ICICI Bank. Now, after two years, the ICICI Bank is on the receiving end. Are we talking about the same old records of Bank of Rajasthan? If yes, why ICICI Bank has not taken timely steps to correct the incomplete records. After all, two years is a long period to take corrective steps. Can we assume that the most trusted brand of private sector banks is also approaching its crisis days?
National Payment Corporation of India had recently proposed to RBI that Cash retraction functionality of Indian ATMs should be removed as this will help the Bank to deal with fraudulent claims of non-receipt of cash. A recent pilot initiated by NPCI(for stopping cash retraction) had given good results in dealing with dubious claims and was extremely effective in controlling various cash retraction related claims.
Good news is that the Reserve Bank of India has agreed to the proposal and has given go ahead to all the banks to remove cash-retraction facility provided on the ATM. The impact of January, 2012 circular has started to show its effect now as more and more banks have now confirmed that they are no more supporting cash retraction in their ATMs.
Now after the implementation of new policy, the cash will remain at the mouth of the ATM, till it is collected. If customer is unable to collect the cash, someone else (the next person who uses the ATM) will surely be benefited by this scheme. Security guard also needs to be more vigilant, as if the customer forgets to collect the cash, he can even accuse the security guard for collecting his cash. Whatever may be the case, the cash not collected incident will be more policing headache than the banking headache.
Many banks have now implemented the scheme and now their ATMs are no more retracting the cash. RBI has asked all the Banks to educate the customers properly by way of displaying this information inside ATM kiosks as well in branches. Implementation of this feature is definitely a practical approach and will allow the Banks to concentrate more on genuine disputes.
As a customer, I was never comfortable with cash retraction system and time allotted to collect cash was considered too short by some users. Moreover, with fraudulent intentions, some customers were holding cash while allowing some part of the cash to be retracted by the ATMs. These customers then approach banks that ATM did no deliver cash and they get credit of the entire amount. While the fact was that some of the cash was forcibly collected by the customer. It is to be noted that ATMs did not have the required mechanism to ascertain number of notes retracted by the System.
My question is :
1) With the positive outcome, will other countries will also follow this approach of NPCI.
2) The conmen will now put heads together to find out new ways to fool ATM. How ?…..only time will tell.
There are many ways of promoting credit cards. But, I really like this unique way of promoting Credit cards. Honesty should not go unrewarded. This is the theme of selling credit cards. And this concept has been brought by National Australia Bank. Chief Executive of this Bank “Cameron Clyne” has to say about his bank in the following words:
“Our strategy is built around putting our customers at the centre and of everything we do and helping them realise their potential”
This Bank is having a customer strength of over 12 million accounts managed by over 50,000 staffs. But what they have recently done to customers is really touching. Actually who doesn’t like honesty and reward? And if these two words are used to give you public recognition then definitely you will like Bank and you will like their staff also.
Here you can find out the recent NAB video “Honesty shouldn’t go unrewarded”. The first line you see on their website is
“At NAB, we believe an honest credit card should do the right thing by you no matter how you use it.”
Please click following to go directly to their website and find out their unique campaign:
Indian economy is bleeding….not because it has financial problems, but because its economy is heavily dependent on cash. The electronic mode of payment for majority of transactions is still a distant reality. Government of India spends billions of rupees every year on printing and managing currencies and coins. While western countries have already adopted eMoney, Indian payment system is way behind in matching western countries in this area.
Now have a look on following news not too old for the readers:
Traders hoard coins to sell them at a premium
AHMEDABAD: Gupta, and his accomplice Jeetendra Rajai, were arrested last week following seizure of around 7 lakh coins from a truck near Dahod check posts. In Ahmedabad there are over 100 traders who hoard currency coins and either sell them off at a premium to those in need or a few who, like Gupta, smuggle it out of Gujarat…….
Now, Re 1, Rs 2, Rs 5 coins drive jewellery business
Kanpur: A member of a gang involved in making artificial jewellery by melting coins has been arrested with coins worth Rs 1.83 lakh here. The accused, Vinay Singh, was arrested at a police checkpost at Fazalganj area last evening with seven gunny bags containing coins of Re 1, Rs 2 and Rs 5 denominations…..
Dhaka: Detectives early yesterday arrested a Pakistani woman from Shahjalal International Airport and seized fake Indian currency amounting to Rs48,00,000 from her possession. The arrestee is Shameem Naz, 47, of Tendu Mohammad in Karachi. Police claimed she is a member of an international counterfeit currency ring, which uses Bangladesh, Nepal and Bhutan as smuggling routes…
So, what are the lessons to be learnt from above examples?
Government around World are increasingly looking into the ways of reducing cash circulation in the economy. Indian Government through its representative have taken various steps to bring electronic money into the system. But somehow, the results are not encouraging. Through everyday news, we find various instances of fake currencies related conspiracy. Fake currencies are being pushed to Indian market through Bangladesh, Nepal, Bhutan etc.
The whole system of cash based economy is having its own demerits. Common man is not able to differentiate between original and fake currencies and when they approach bank to deposit, they have to face the law of the land. So, what it takes Indian policy makers to quickly move to cashless economy? Economists see following benefits of the cashless economy:
-Currencies and coins are always expensive to print, circulate and store.
-Fake currencies always creates problem as criminal see this an opportunity to counterfeit.
-Cash increases various criminal activities such as black money, illegal trades, smuggling, drug dealers transactions and even bank robberies. Eliminating cash will make it more difficult for the criminals to do business.
-Cashless system will give Governments to control money as per the regulation and they would be able to track virtually all the transaction resulting more tax collection.
As per a recent Washington post article, in Sweden, only 3% of transactions involve cash. Credit and Debit cards are dominant in Sweden payment system. Not only in Sweden, but in most of the developed countries, above 90% of transactions are cashless. Mobile payment is bringing new way of cashless payment system. Other prominent countries are Norway, Austria, Finland etc.
Reserve Bank of India has taken various steps to curb the cash based transactions. However, these steps are not sufficient. We do not want to see when vegetable vendor of the locality will start accepting eMoney, but we want to see when all these vendors including parking areas, taxi-man, city buses, local trains, food joints will stop accepting cash . According to recent estimate, there are about 120 trillion rupees of fake currencies are in circulation in Indian economy. Just imagine the effect of this money on our daily life and the sufferings of common people due to inflation !
When this happens then only Bank robberies, mugging, fake currencies circulation, cash bribery and Hawala based transactions will reduce as they have in Sweden. After all, what is the point in hoarding cash when there is no one accepting them ?
And now Food for Thought for readers of mycardclub.com………
Happy is he who has overcome all selfishness, happy is he who has attained peace; and happy is he who has found the truth. – Gautam Buddha
Around 10 years back, there was a wave of e-commerce portals. Every e-commerce based companies were announcing plan to grab the Internet market for business. However, few find it lucrative now. Now a days, mobile money is also being considered as a lucrative business after the success of M-pesa in Kenya. India being a developing country presents an ideal platform for mobile money transfer. but while every e-commerce portal cannot become ebay, in the same way every mobile based payment system cannot become m-pesa.
Recently, the giant Mobile network operator Airtel has launched Airtel Mobile Money in India. It is a good news for Indian mobile subscribers. Mobile has become a fast medium to transfer money. There are many established and emerging markets around the world for mobile payments.
I have tried to compile some features of this service and also gone into the technical aspects of this service. Most of the service related details are available on its website. Airtel Mobile Money can perform money transfer, bill payment, pre-paid recharge. There are two types of account suggested – 1) Express Account and 2) Power Account. Express Account can load cash up to a limit of Rs.10,000, while for power account, this limit is Rs.50,000.
Any mobile payment related service adopts one of the following technologies for accessing mobile application sitting at the back-end.
1) USSD(Short code) based solution - This is very common among all the applications available. It is suitable to any platform and it is rather easy to implement. This solution is open type and there is less security available both at the user side as well as at the server side. The transaction takes place in the form of a series of text exchange(in one session) between the application platform and user. There is no menu based selection available and some code is sent to USSD Gateway to send signal to server to respond. Staff on the application side can see all the transaction and no encryption is available even for the PIN.
2) Java application based solution - An application resides at the application server side and upon registration, user receives a URL on the basis of which he can download application on mobile phone. Once downloaded, User can install application on his mobile set and use the menu selection for registration, inquiry and transfer etc. Limitation is that not all mobile set supports Java application and low end all users may not be having Internet facility. It is more secured than USSD based solution but many other measures has to be taken on server side to make it more secure and acceptable. It is menu driven and comparatively easy to use.
3) DSTK(Dynamic SIM Tool Kit) based solution - This is rather new technology and not all application is capable of offering this feature. However it is most recommended because it’s security and scalibility features. Under this solution, an application resides on the SIM card itself and it can be activated once the customer register himself with the solution. This is a called pre-loaded mobile application and it may cost the operator. It has more security features and menu is dynamic – orientation can be changed, some features can be made hidden and new features can be added on a later date. Encryption is available at both the side(SIM and Server) and it is very user-friendly.
After presenting some basic details of mobile payment system, here is my analysis of Airtel mobile money system:
1) This system presents a USSD based payment system and you have to dial *400# to get started. Now here as a user, you must be having airtel SIM card and you have to struggle to remember this short code and related sms code to get going.
2) Express account cannot send money. The basic concept of money transfer gets defeated here. However, the power account has this feature.
3) Sending money from one mobile account to another mobile account is possible only when both the subscribers are using same operator(airtel). To cut short, being an airtel subscriber, you cannot send money to Idea mobile customer. So, there is not interoperability between operators.
4) Success of mobile money is always dependent on network of agents. But here, this role is performed by Airtel outlets and relationship centers and not many of these centers are present now in every nook and corner of India.
5) Once you load cash, you cannot withdraw it. Yes, this is true and here RBI does not allow the airtel outlets to distribute cash to customers. This is one of the limitation of this program and it will result into restricted use of this service.
6) Subscribers are not getting any interest on the cash loaded onto the wallet. My fear is, subscriber will prefer money to be kept in saving account rather than transferring to mobile wallet. They can use debit card to make payment to almost all the merchants.
7) The difficulties faced by those citizens who are living in remote areas or villages are many. One of those is going to a far bank/post-office to get cash. And if they do not have bank account, then they are considered out of the banking financial system. No efforts have been taken by Airtel mobile money to reach to these customers.
8 ) Think of a situation where in future there will be 10 different operators offering mobile financial system. What will happen, if customer is not satisfied with the service and wants to shift to another operator? Will the Airtel oblige customer by providing refund of the amount kept in mwallet ? If not, the feature of number portability will be having no meaning here.
9) You cannot withdraw cash from any agent/outlet, however you can transfer this mwallet amount to any bank account. But this is going to cost the subscribers 2% of the amount minimum Rs.10.
10) Another aspect is that merchant can levy their own charges for using mobile money to pay for their merchandise. Remember, customers do not pay extra amount to buy merchandise using debit/credit card.
From the promotions the common people will understand that Airtel mobile money is for affluent person having swanky sets in their hand and going to movie theater, shopping mall etc. Nowhere in TVC, it has been highlighted that people living in rural area can also avail this service. Marketing team of Airtel has to really work hard on this aspect and make this service reachable to all. After all. it is said that heart of India lives in villages….you have to take this mobile money service to the heart of India.
Please see Airtel Mobile Money TVC here:
In spite of all the above considerable points for promoters, I personally wish a great success for Airtel Mobile Money in India.
And now Food for Thought for readers of mycardclub.com………
Though a man conquers a thousand men in battle, a greater conqueror still is he who conquers himself. – Gautam Buddha
Paypal is a leader in card related acceptance system…..They have recently launched a device that can be attached to mobile phone and you can do card transactions….Just similar to what Square is offering….difference is that while Paypal device is blue in color and triangle in shape, square is white in color and square in shape. You can get more details of this device of Paypal from following link:
Square was started in 2009 by Twitter founder Jack Dorsey and it is currently the mobile payments market leader. Square’s card reader, which is square and white in color, attaches to the top of iPhones and other mobile devices. It has been a hit among small merchants in US such as cab drivers.
Visa Inc bought a stake in Square last year. Apart from Sqaure, other solutions offered in the market are Intuit GoPayment and PAYware Mobile. All these solutions are coming from experienced entrepreneurs and seasoned payment veterans, and each offers a slight variation on the same idea that you can accept payments from anyone, everywhere
More details on Square, Intuit GoPayment and PAYware Mobile can be had from the following link:
This technology change has brought wholesome changes in card acceptance devices. Now any merchants can afford to have card acceptance system without feeling the burden of high rentals and service charges. All the new devices has made it easy and affordable for small businesses, professionals, seasonal merchants & tradespeople to accept major credit cards.
Another good article on the subject matter can be found here:
Recently, I had written an article on how conman are devising new methods to steal money from innocent customer’s bank account. You can visit this post by clicking on Conman devised new ways to steal money from your card.
Now there was a news item in Times of India dated 21st December, 2011. Two minor boys from a nearby slum have shown their skills to nearly break open one ATM to steal money when the cops caught them red-handed. This happened in a suburb of Mumbai and the time was a little earlier than 3 am. Learn more details on this Times of India story by clicking here.
Here is again an image of this news item presented for the readers:
Times of India news story
I have personally visited various ATMs belonging to both of private Banks and public Banks. I have found that over the years, some banks have become very casual in managing ATM centres. Non-presence of security or the security man sleeping inside ATM room are very common now a days. If you enter into some ATM rooms, you will find that even ACs are not working. It feels that you have entered into a furnace cubical. Dusty and untidy ATMs are very common in India. I have found ATM centres of HDFC and ICICI are somehow presenting a nice look as per their Bank’s image. But condition of most of the other Bank’s ATM centres are better not to be mentioned here.
Recently, there were several cases of ATM related theft and fraud. Banks are not taking minimum precautions to stop these theft. In most of these cases, an outside agency is managing ATM centres and the money kept inside ATM is insured. But that does not mean that minimum guidelines laid down for maintaining ATM centre should be ignored. Non-presence of camera or camera not working are some of the very common complaints heard after ATM money theft.
I would also like to mention one of my related concern here. The ATMs installed in India are also visited by many foreigners. Tourists coming from foreign destinations will be carrying a bad image of our country, if they find our ATM centres untidy and dirty from inside. Banks should not forget that these ATM centres reflect image of Bank, as more and more customers are visiting ATM to withdraw money. So all possible steps should be taken by the Banks to present a nice interior of ATM centres for the customers. Here is a nice article which can tell you about the conditions of most of the ATMs. It says that ATM centres are found to be as dirty as public toilets. Most of the ATM centres are full of bacteria enough to cause cold-cough related sickness and diarrhoea.
Through this article, I urge RBI to take necessary steps to improve condition of ATM centres in India and have an independent monitoring system to inspect, rate and submit report to banks. An RBI guidelines on this would be welcomed by customers.
Three people coming from well affluent families and having sound financial position, have been caught red-handed stealing money from card accounts. This story is coming from National capital of India and this could be a new case study for risk and fraud control professionals of the card industry.
Names of accused: Lalit Kumar (27), Leader Khan (25) and Ranjeeth Sahni (22)
ATMs targeted: Various unmanned ATMs of Axis Bank, Punjab National Bank of southeast Delhi.
Total number of fraudulent transactions : 44
Amount withdrawn: Several lacs of Indian rupees( 1 lac = 100,000)
Modus Operandi: To understand modus operandi of this operation, I focus on the following main points of this operation:
- Unmanned ATMs were the easy target for them.
- They used glue to fix hash(#) key on the key pad so that entire keypad starts behaving suspiciously resulting in the customer to leave the ATM room in a huff without completing transaction.
- Next comes one of the conman and he offers help to the cardholder in completing the transaction. – Unsuspected cardholder repeats the transaction in front of conman and exposes his PIN.
- Again ATM refuses to delivery cash but ATM keeps the details of card in its temporary memory(transaction was not cancelled).
- As soon as cardholder leaves, the trio unlock hash(#) key, complete the transaction and withdraw money.
Lesson learned : Cardholders took help of stranger inside ATM room to withdraw money and did not reported suspected incident to their Banks.
Hot Questions unanswered: The company responsible for managing these ATMs claims that they have changed the software and the new software will not allow these types of fraudulent transactions. Probably, they will not allow these transactions further to take place on their switch. However, this incident should be reported all over the World so that all the ATM switch owner can take precautionary measures in their operation command area.
The other hot questions may raise debatable points for the readers as under:
- Banks are not keeping their ATMs attended by security guards on 24×7 basis.
- It took about 4 months to stop these types of suspected transactions.
- Card transaction was not cancelled properly by the customers.
- A lot is needed to educate customers on ATM transactions’ security.
- So many improvements, so many technology has not stopped fraudulent ATM transactions to take place even today.
And the ATMs that fell to these kind of traps were one swipe ATMs. Does this mean that one swipe ATMs are more vulnerable to fraudulent transactions than the swallow ATM(the ATM ,which retains card for completing the transaction) ?
The day on which I launched mycardclub.com, I came to know about a news item in print media telling us about a new technology that will prevent credit cards from online fraud. I hope you had come across similar claims some years back, when similar new technology was adopted to prevent online fraud? So, this is not the first time we are hearing about prevention of online fraud. Right ?
This technology has again come from Visa, a leader in payment system. Some years back there was a tall claim about Verified by Visa – which was very good indeed for prevention of online fraud. But even today, when I visit various online portals – a large number of them do not support Verified by Visa.
As per this technology, the card will be having the facility of a numeric keyboard embedded on it. It will also be having a small screen which will display a constant changing password based on PIN entered by the user. This will generate a onetime dynamic password each time an internet purchase needs to be authorized. This will also support in Internet banking…So we will be having a password generator in our pocket always.
Great ! No doubt, it will make transaction safer by using dynamically generated password. But, what about convenience for customers? Is it that the cardholder going to feel comfort by entering the PIN and generated password each time he visits an e-commerce site? At least I was not comfortable by using similar digital device receiving a dynamic generated code every few seconds for my online share transactions.
Most of the customers are still not very comfortable with the Verified by Visa concept…forget about registering themselves on the site and using the static password generated each time they have to make online purchase. Most of the online merchants have still to become members of Verified by Visa. Visa should focus more on to popularize their Verified by Visa system, so that it can become acceptable by masses across the World.
And technology does not come free. I’m sure that this new embedded keyboard device is going to hit hard the pockets of the cardholders in terms of issuance fee or annual fee. So, more money is going to flow from cardholder’s pocket to issuer’s account.
Write to me if you feel that this new technology is going to make your life easy.
The information contained in mycardclub.com is for general information purposes only and does not constitute professional financial advice. Please contact an independent financial professional for advice regarding your specific situation.
By reading this blog you acknowledge full responsibility for your actions with respect to any loss or damage caused or alleged to be caused directly or indirectly in connection with the blog.
These penalties were for “failure to obtain adequate documents for opening accounts, failure to carry out sufficient customer identification procedures, failure to examine control structure of entities, failure to ascertain the identification of natural persons behind entities, failure to carry out effective enhanced due diligence, failure to carry out appropriate risk categorisation and delay in filing the suspicious transaction reports,” RBI said.
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