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How will Uber's RBI-compliant payment system work?

Uber has figured out a way to meet RBI norms for credit card payments, launches new payment system today

BS Web Team  |  Mumbai 

An illustration picture shows the logo of car-sharing service app Uber on a smartphone next to the picture of an official German taxi sign in Frankfurt

Uber, the taxi aggregation service, has finally managed to overcome at least one major regulatory hurdle in its so-far bumpy ride in the country.

On Sunday evening, the Uber India announced that starting July 13, it would go back to offering credit card payments on its app, saying it has now introduced an authentication process in the app that conforms with Reserve Bank of India guidelines. The revised payment service will be available to all Android users immediately while Apple iOS users will be able to use the service in a few weeks, it said.

Like with other electronic payments, registered users will need to save their credit card details within the mobile app. Card details linked to each user and mobile number will be stored on Uber’s servers; each time a user takes a ride, s/he will have to enter either an online banking PIN or a one-time password (OTP) to make the payment.

Like earlier, there will be no need to share any details with the driver since the entire process will be done through the smartphone. There is also no need to place physical card-swiping machines within cabs, which would have significantly raised expenses for the company and drivers.

“You can now pay for all your Uber rides using international and Indian credit cards. Adhering to the RBI regulations, there shall be two-factor authentication flow built into the app and, we will need you to enter your online banking pin or one-time password before we can charge the fare to your card,” Uber said in a statement. Passengers can also continue using their Paytm digital wallets to pay for Uber rides.

How New Uber Payment Process Will Work
  • Download the mobile app and sign up for an Uber account on your GPS-enabled smartphone
  • Save your credit card details on Uber's mobile app
  • Use the app to locate an Uber cab closest to you.
  • At end of ride, make a payment using the saved credit card data.
  • Use your online banking PIN number or a one-time payment code sent to your phone to authenticate the payment.

“While we now accept credit cards. We continue to accept Paytm Wallet as a mode of payment," the company said in a statement.

Last year, the RBI mandated that electronic payments that do not involve a card swipe must be authenticated by another level of clearance, such as an online banking PIN number or a one-time password that is typically sent to the user as an SMS or email, or both. This is done to ensure a second layer of security for the cardholder and to prevent unauthorised and/or fraudulent use of the card.

The Uber app earlier worked on a system where users can hail a cab based on their GPS location and could make a payment directly to Uber via credit card details stored in the app.

In August 2014, however, rival such as Meru and Easycab, which operate radio-taxi services – where, instead of a GPS-based app on a phone, users must dial a call centre to book a cab – alleged that Uber was violation Reserve Bank of India rules by not following proper authentication procedures for payments, and possibly also foreign exchange remittance laws since the payments from India were often going directly to the parent company based in the US.

Following this, the central bank issued a circular aimed at foreign-based entities, such as Uber, that accepted electronic payments generated within India.

“It has come to our notice that there are instances of card not-present transactions being effected without the mandated additional authentication/validation, even where the underlying transactions are essentially taking place between two residents in India (card issued in India being used for purchase of goods and service offered by a merchant/service provider in India). It is also observed that these entities are evading the mandate of additional authentication/validation by following business/payment models which are resulting in foreign exchange outflow,” RBI said in an August 2014 circular.

The central bank also insisted that all such payments must be made and settled in that currency.

Subsequently, after failing to incorporate a second factor of authentication, Uber India on December 1 stopped taking credit card payments directly; instead, it tied with mobile wallet provider Paytm, which had the necessary technology and clearances to process payments for cab rides.

Shortly after, Uber ran afoul of public and official perception again after one of its drivers was charged with raping a female passenger, leading to a ban on its services in multiple cities, including Delhi and Maharashtra. The company was accused of being lax in its security processes for driver verification after it was found that the alleged rapist had a history of sexual offences in his hometown.

Uber has been valued at almost $50 billion and is rumoured to shortly issue an Initial Public Offering that will enable it to trade publicly and raise more money through equity.

India is Uber’s second largest market globally after the US, with services in 18 Indian cities; last week, the company announced it would set up a $50 million response and support centre in Hyderabad over a five-year period. Uber’s new facility will act as a centralised response and support centre for the thousands of drivers on its network, as well as for its customers. Until now, consumer and partner queries and grievances were addressed by local offices.

First Published: Mon, July 13 2015. 11:27 IST
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