RBI Proposes Enhanced Two-Factor Authentication Rules for Digital Payments

To strengthen security against cyber-attacks, new draft standards include dynamic authentication factors for online payments.

A new set of regulations instructing the usage of active authentication factors has been recommended by the Reserve Bank of India (RBI) to improve the security of digital payments. The draft framework, which was released on July 31, 2024, aims to address growing cyber threats and improve fraud prevention.

The new regulations mandate that a dynamically generated authentication factor be included in all digital payment transactions, with the possible exemption of card-present transactions, small value contactless payments, and some recurring payments. This is a transaction-specific variable that is non-reusable. A variety of authentication methods, including passwords, tangible tokens, and biometric identifiers, are included in the RBI framework.

The RBI has introduced updated KYC (Know Your Customer) procedures and upgrading e-mandates for recurring payments in addition to the new authentication criteria to guarantee ongoing verification for transactions that haven't been completed in the previous six months.

The proposed regulations will take effect for financial institutions in three months, and until August 31, 2024, the public may comment on the plans. It is expected that these modifications will lessen the possibility of unwanted access to bank information and improve customer security when transactions are digitally.