Cardless Cash Withdrawals at ATMs

Q Why is it in News ?

A Recently, the Reserve Bank of India (RBI) announced cardless cash withdrawals at ATMs across the country which will enable consumers to use Unified Payment Interface (UPI) on their smartphones to withdraw cash from Automatic Teller Machine (ATMs).

Q How is this Step Significant?

A 

• Enhance Security of Cash Withdrawal:
  • It would help prevent frauds like card skimming and card cloning.
• Enable users to Take Cash from Any ATM:
  • Currently, only existing customers of a few banks are allowed to withdraw cash without cards, and from specific bank’s ATM networks.
  • However, the RBI's move to allow interoperability in cardless withdrawals will enable users to take cash from any and all ATMs.
• Invite More Players into the Payment Ecosystem:
  • The move will invite more players into the payment ecosystem in India to innovate and solve further problems of customers.

Q What is Card Skimming or Card Cloning?

A 

• Credit card cloning or skimming is the illegal act of making unauthorized copies of credit or debit cards.
• This enables criminals to use them for payments, effectively stealing the cardholder’s money and/or putting the cardholder in debt.
• Once the device picks up the data, it can be used to gain unauthorised access to the user’s banking records.
  The stolen information can be coded onto a new card, a process called cloning, and be used to make payments and transact with other bank accounts.

Q What are the Challenges in Cardless Cash Withdrawal Feature?

A 

• Limitation on Cash Withdrawal:
  • Currently, ICICI Bank, Kotak Mahindra Bank, HDFC Bank and SBI allow cardless cash withdrawals for their users. But, accessing the feature is cumbersome as it has certain withdrawal limits, and the transaction is charged.
• Scalability of this Feature:
  • Scalability of this feature might be a challenge as it has to be seen how many banks quickly roll it out to their customers.
• Security Related Issue:
  • In cardless withdrawal, the security vulnerability of a card is minimised, but the risk will soon transfer to a mobile-enabled feature.
    • The mobile can now become the epicentre of transactions, making it the next target for fraudsters.

Q What is the Future of Debit Cards?

A 

• Issuing cards will not be stopped as they have several other utilities beyond cash withdrawals. They can be used at a restaurant, shop, or for payments in a foreign country.
• A debit card is a very evolved financial product and has already gone through a lot of iterations to reach its current perfection.
• Thus, the debit card will continue to serve some segments of the economy.

Q What is Unified Payment Interface (UPI)?

A 

• It is an advanced version of Immediate Payment Service (IMPS)- round–the-clock funds transfer service to make cashless payments faster, easier and smoother.
• UPI is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood.
• UPI is currently the biggest among the National Payments Corporation of India (NPCI) operated systems including National Automated Clearing House (NACH), Immediate Payment Service (IMPS), Aadhaar
• enabled Payment System (AePS), Bharat Bill Payment System (BBPS), RuPay etc.
• The top UPI apps today include PhonePe, Paytm, Google Pay, Amazon Pay and BHIM, the latter being the Government offering.