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| Tuesday, 29 June 2004 |
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Minimising credit card fraud Credit cards were virtually unknown in this country even 10 years ago. Only the super rich carried plastic, as credit cards are commonly called. Now, credit cards are one of the fastest growing segments in the local banking business, with over 400,000 cards in active use. More applications are pouring into the banks daily. Commercial banks have established credit card divisions to cope with this soaring demand. Several factors have led to this phenomenon. Local banks have forged close links with Visa and Mastercard, the world's premier credit card operators. American Express too began local operations recently. The banks have made it easier for middle income earners and the self-employed to acquire credit cards. The banks have also installed electronic credit card swipe terminals throughout the country and more merchants are entering the card network daily. Merchants as well as banks actively promote the use of credit cards through attractive discounts, longer interest free periods, loyalty schemes and valued added services such as insurance. The prime reason for the popularity of credit cards is that they can be used in place of cash. With a credit card in the wallet, one does not have to carry large amounts of cash. Unlike cash, a credit card can be deactivated if stolen and a replacement ordered. The liberalisation of foreign exchange laws has enabled banks to issue international credit cards. These cards have become popular among regular travellers, mainly because it is more convenient than cash and even Travellers Cheques. Credit card companies are also gradually introducing debit cards such as Visa Electron, which are directly linked to the customer's bank account. When the customer completes a transaction, the amount payable is directly deducted from his or her account. Visa has also introduced TravelMoney, a stored value cash card which the customer can 'top up'. A credit card may be the passport to freedom, but their widespread use has created a host of problems too. The proliferation of credit cards and the expansion of the Internet are two recent trends that have paved the way for fraud on a massive scale. Many e-commerce websites accept credit cards, but not all online transactions may be secure. Unlike a personal, physical transaction, the credit card user remains unseen in an online transaction. There is also no way to verify the signature and identification. This has given way to credit card impersonation and other forms of online fraud. In fact, credit card fraud has become a headache for police forces and banks everywhere. Credit cards are stolen, copied, used without authorisation and used fraudulently in a variety of other ways, long before the legitimate owner realises the gravity of the situation. Some of the owners realise they have been conned only when they see the monthly statement. But credit card operators and banks are fighting back. Credit/debit cards with microchips carrying details of the owner as well as photo ID are now common. This minimises fraud to a great extent. Both Visa and Mastercard are launching cards which do not require a signature. Instead, the user has to key in a complicated Personal Identification Number (PIN) on the credit card terminal. This number, known only to the user, is generally hard to decode. There have been suggestions that fingerprints and even facial scans be used to identify genuine card users. Despite these impediments, the use of credit cards is bound to grow locally and internationally. Law enforcement authorities, credit card operators and banks must work together to minimise credit card fraud. They should cooperate on a global scale to achieve this objective. In the meantime, the sheer convenience of credit cards is likely to win millions more converts. |
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