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Table of Contents

Lead Story

Thriving in a disruptive market - ISO strategies


Industry Update

FTC reports on Durbin enforcement

VeriFone says micro-merchant acquiring unprofitable

New malware infects POS terminals

SmartMetric CEO may see confidential info


The Business of Wanting More:
A capitalist's guide to transformation

Five predictions for billing and payment in 2013

Research Rundown

Meet The Expert: Matthew Golis

Showrooming: A merchant's challenge

Selling Prepaid

Prepaid in brief

Gift card mall goes mobile

Gift cards remain prepaid powerhouse


Replacing rootstock: The payments agenda for 2013

Brandes Elitch
CrossCheck Inc.


Street SmartsSM:
Thwart SAD: Winterize your sales plan

Jeff Fortney
Clearent LLC

Take stock with a brand and marketing audit

Peggy Bekavac Olson
Strategic Marketing

Mitigating POS terminal fraud in India

Sunil Rongala
MRL Posnet Private Ltd.

Company Profile

eMerchantPay Corp.

Merchant Statement Analysis

New Products

A smart, customer-centric platform

Genius Customer Engagement Platform
Merchant Warehouse

Patented, online mobile fraud protection

SecureBuy 2.0
SignatureLink Inc.


Use your strengths to improve weak areas


Readers Speak

Resource Guide


A Bigger Thing

The Green Sheet Online Edition

January 14, 2013  •  Issue 13:01:01

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Mitigating POS terminal fraud in India

By Sunil Rongala

Editor's Note: While the majority of our readers are doing business in the United States, The Green Sheet periodically publishes articles about the payments landscape in other countries and regions. This is because the various economies of the world are interconnected, some U.S. payment professionals are already expanding or wish to expand their businesses beyond our borders, and cross-pollination of ideas and practices across global regions could foster further innovation to boost business within the U.S. payments market and elsewhere.

Fraud is a growth industry, and payment card fraud is a growth industry on steroids. Annual card fraud runs into the tens of billions of dollars, and India remains a top destination for card fraud done on POS terminals. Existing mitigation efforts are touching only the tip of the iceberg and are focused primarily on reducing financial liability, not preventing fraud before it happens.

The future of fraud

While e-commerce transactions are on the rise, card fraud in that realm has largely been contained because of mandatory two-factor authentication on all transactions done using Indian cards on Indian websites. This article focuses on card fraud done on POS terminals because it is very likely this is where large-scale fraud will happen going forward.

The number of POS terminals in India, depending on whom you ask, currently ranges from 400,000 to 600,000, with the industry having seen no real growth in the past few years.

This is set to change. A consortium of government-owned banks recently put out a request for proposal that "involves the selection of Service Providers who can manage the entire Merchant Acquiring Business of the Public Sector banks on a fully outsourced model by giving an end-to-end solution related to deployment of POS terminals at Merchant locations and providing the complete range of Managed Services."

The consortium expects the deployment of 1.5 million terminals in the first year of operations and 2.6 million in the second. These numbers are impressive and almost certainly mean that fraud on POS terminals is going to rise.

POS transactions in India

Currently there are 18.5 million credit cards and 306 million debit cards in the country. In fiscal year (FY) 12 (which began in April 2011 ended in March 2012), credit card transactions volume was 319 million, and the value was 966 billion Indian rupees (INR). There were 327 million debit card transactions for a value totalling INR 534 billion.

In the first seven months of FY 13, the number of credit cards in circulation went up 5.2 percent year over year; the volume grew at 22.6 percent; value was up 25.3 percent.

For debit cards, the number went up by 20.1 percent; transactions volume grew at 36.7 percent; value was up 30.4 percent. With this sort of solid growth, this space will inevitably look more attractive to fraudsters.

Types of card fraud

The types of card fraud occurring in India, especially in the case of POS terminals, are:

The problems

In India, the fight against fraudsters is compounded by problems on several fronts. These include:

Fraud mitigation

Obviously, fraud will never fall by 100 percent, but steps can be taken to dramatically reduce it. Some steps being taken, apart from monitoring transactions using fraud detection tools, are:

Despite these measures, credit cards account for nearly 64 percent of all payment card transactions in India, and these cards are still liable to be stolen or skimmed.

Because of this, true fraud mitigation should go beyond reducing financial liabilities and should include detection before the fact. That said, acquirers are not entirely at fault because no merchant underwriting is available in India.

Proper mitigation can only be achieved if a negative merchant database is established, which has been proposed by regulators. However, for a negative database to work in India, it must be tied to a biometric database.

The Unique ID (UID) program, which is tasked with assigning each Indian a unique identification number in addition to maintaining a database of biometric information, may provide the answer. The program has already rolled out over 300 million such IDs. If the proposed database is not tied to the UID program, it will be dead on arrival, and with it, a large part of India's effort to fight card fraud.

Sunil Rongala is the Head of Risk Containment and Business Strategy at MRL Posnet Private Ltd., a technology-driven transactions facilitator based in India. He is a professional economist and holds a Ph.D. in economics from Claremont Graduate University in California. To reach him, call +91-99490-61784, fax +91-40-2355-4002 or send an email to

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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