Card swipe machines may raise banks' costs

Banks are free to decide whether to adopt Aadhaar as an additional authentication factor or shift to the Europay, MasterCard and Visa chip-and-pin technology to secure card-present payment infrastruc

For banks, compliance with the Reserve Bank of India (RBI)’s directive to install new card-swipe machines (with biometric scanners to enable Aadhaar authentication) would come at a cost. But experts say in time, this would benefit banks.

In a circular released on Tuesday, the central bank told banks to upgrade card-swipe machines to facilitate Aadhaar authentication. Banks are, however, free to decide whether to adopt Aadhaar as an additional authentication factor or shift to the Europay, MasterCard and Visa (EMV) chip-and-pin technology to secure card-present payment infrastructure.

“This will lead to economies of scale. Though the cost of card-swipe machines will go up, it is bearable . The benefit is it will help get a fresh type of transactions,” said B Amrish Rau, general manager, First Data Merchant Solutions Asia, a global technology and payments processing leader. Rau said the prices of card-swipe machines would rise Rs 6,000-7,000 each.

Even as banks are replacing point-of-sales (POS) terminals with those enabled to accept EMV chip-and-pin based cards, RBI has asked them to add another feature in POS machines. This means, even POS machines replaced recently might have to be replaced, raising the cost for banks.

According to the head of the cards and direct banking business of a private bank, this would result in an additional feature of validation at POS machines using the Unique Identification Authority of India (UIDAI) number.

“This has come as a surprise to us because RBI had not discussed this with banks so far. Now, POS terminals will have to be changed to accept biometric validation,” the official said, on the condition of anonymity.

RBI has also said in case of cards for which EMV norms weren’t mandated, banks might decide whether to adopt Aadhaar as an additional authentication factor or shift to the EMV chip-and-pin technology as a security feature.

Cards for which EMV norms aren’t mandated are those meant for domestic transactions alone.