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    Replace SMS alerts for customers' bank transactions with app notifications: industry lobbies

    Synopsis

    In its representation to RBI, the industry lobby pointed out that the short messaging service charges are estimated at ₹0.12 per message while the cost of an ‘In-App notification’ is pegged at ₹ 0.001.

    government to replace SMS notifications of transactions with in-app notifications_THUMB IMAGE_ETTECH_1ETtech
    Bengaluru/ New Delhi: Fintech majors including the likes of GooglePay and Paytm are among those petitioning the government to consider in-app alerts as an alternative to the mandated SMS notifications for banking transactions, citing higher cost as well as security risks as triggers for the industry wide representation, multiple people aware of the development told ET. For a smooth transition to the new system, customers can be given the option of choosing both or either options, the industry has proposed.

    In a representation sent on May 30, the National Association of Software and Service Companies ( Nasscom) has requested the central bank to consider allowing app-based notifications for banking transactions. Currently, the Reserve Bank of India (RBI) requires banks to send only SMS alerts to customers for each transaction with the cost borne by the RBI-regulated entities which includes all banks and financial services firms.

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    In its representation to RBI, the industry lobby pointed out that the short messaging service charges are estimated at ₹0.12 per message while the cost of an ‘In-App notification’ is pegged at ₹ 0.001.

    It added that the country recorded digital payment transactions worth Rs 8,734 crore in financial year 2022, and the cost of SMS -based notifications would therefore have added up to approximately Rs 1048 crore. In contrast, in-app notifications would have cost about Rs 8.8 crore, the grouping said.

    “The intent of RBI is to ensure that a consumer is aware of activities in her transaction account. Focus of a regulation should be to enable secure and efficient access to information instead of limiting the method of information transmission or storage,” Nasscom’s public policy vice president Ashish Aggarwal told ET.

    The industry lobby has also suggested that customers, initially, be given an option to choose either or both SMS and ‘In-App notifications’ for small volume transactions of up to ₹10,000.

    For the transactions higher than ₹10,000, both SMS and ‘In-App notifications’ may be mandatory and later the thresholds may be increased, it stated.

    Google, Paytm and PhonePe did not comment on the development.

    RBI did not respond to ET’s queries on the issue.

    According to a report by National Payments Corporation of India (NPCI), approximately 87% of Indian households in 2020, received SMS updates from banks.

    “There is an ongoing discussion regarding this between the industry and the RBI,” according to Naveen Surya, chairman emeritus of the Payments Council of India (PCI), who said the focus of the talks has been around specific “alerts for the type of transaction and alternative solutions available, and whether it can meet the level of security required.”

    “Hopefully, additional alternate solutions could be on the horizon," he said, adding that “a cohort has been formed by the fintech department of the RBI” in this direction.

    Security Risks
    A fintech executive said the industry “has been requesting through direct representations made to the RBI as well through the Payment Council of India that SMS should be replaced by in-app notifications”. He pointed to what he termed as “several benefits” including “significant cost savings as SMS is an expensive channel,” as well as “fewer chances of frauds with in-app notifications as it is linked to a user's behaviour on the app.”

    Further “in-app notifications get triggered in real time and customers get notified as soon as a transaction is done,” he added.

    Industry claims that the failure rate for SMS-based notifications is higher and since ‘In-App notifications’ serve as direct communication between the bank and customer, they might have a higher success rate than SMS-based notifications.

    Industry sources also contend that SMS alerts are commonly used by fraudsters and that there is no mechanism in place to authenticate and ascertain genuineness of such SMSes.

    Why industry wants in-app notificationsETtech


    “There have been instances where customers have fallen prey to such malicious SMS senders who pretend to be an RBI Regulated Entity (RE),” the sources said.

    Pointing out that ‘In-App notifications’ eliminate third-parties and are a direct channel of communication between bank and customers, Nasscom’s Aggarwal said, “Notifications should not be restricted to SMS-es and should be extended to ‘In-App’ notifications as well, subject to certain safeguards such as retention of notifications.”

    “Customers should be allowed to retain these messages in perpetuity, and that in case a customer changes their cellular device or has deleted the app, older alerts should be retained in the chat messages section,” Nasscom’s recommendation said.

    As only regulated entities are allowed to send ‘In-App notifications’ , it mitigates the possibility of malicious messages defrauding customers. As no third party will be able to send ‘In-app notifications’, the possibility of frauds might be reduced, the industry lobby said.

    It added a caveat that these considerations may exist only for customers with "access to smartphones, internet and mobile-banking apps".
    The Economic Times

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