RBI Update: No more fraud in online payments! RBI has made sure arrangements will be implemented from April 1st...

The Reserve Bank of India (RBI) has made significant changes to its digital payments regulations, which will come into effect on April 1st of next year. In addition to SMS OTPs, several new methods of two-factor authentication (2FA) will be available for transactions, such as passwords, fingerprints, and biometrics. This will make online transactions even more secure and convenient. These new regulations aim to reduce fraud and provide greater security to customers.

The RBI announced on Thursday that new digital payment regulations will come into effect on April 1st of next year. The new regulations allow for additional two-factor authentication (2FA) methods beyond SMS-based one-time passwords (OTPs). The RBI stated that any loss resulting from a transaction conducted without following these guidelines will be fully compensated by the customer.

What could be the methods?
The RBI stated that identification methods could be "something the user has," "something the user knows," or "something the user is." These could include passwords, SMS-based OTP passphrases, PINs, card hardware, software tokens, fingerprints, or any other form of biometrics (device-native or Aadhaar-based). The RBI directive clarifies that 2FA will remain mandatory and SMS OTPs can also be used.

India is among the global markets that emphasize 2FA. Financial sector players have relied on SMS-based alerts to complete transactions. The central bank first announced this move in February 2024. The aim was to enable the payment ecosystem to leverage technological advancements to implement alternative authentication mechanisms.

Unique System
The new rules require that at least one authentication factor be dynamically generated or verified. It must be unique to that transaction. Furthermore, the system must be in place where a compromise to one factor does not impact the reliability of the others.

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