Credit card numbers shrink, but spends rise

MUMBAI: The number of outstanding credit cards in India continued to shrink in 201112 largely because of a continued clean-up operation by ICICI Bank at one time the largest credit card issuer in the country. Foreign banks have also contributedtothedeclinewith HSBC, RBS,Barclays and StanChart posting lower numbers and Deutsche Bank exiting the business. Bankers say that the industry is now close to getting into the growth mode again with HDFC Bank, Axis, SBI and Citi growing their card business aggressively. HDFC Bank, which was among the late entrants, has emerged the industry leader with 55.6 lakh credit cards an increase of 4.7 lakh in the current fiscal alone whichisclosetothe number of deletions by ICICI Bank. The positive for the industry is that while card numbers are shrinking, revenues are rising sharply. Total card spend which was Rs 7,055 crore in the month of April 2011 has risen to Rs 8,867 crore in January 2012. The other positiveisthatthe average amount spent by a card holder in a month has risen to Rs 4,998 from Rs 3,698 at the beginning of the quarter.The average monthly transactions were highest for American Express Bank at Rs 20,498 followedby Citibank atRs 7,210 and Standard Chartered Bank atRs5,752. According to Uttam Nayak, group country manager, Indian and South Asia, at Visa, there is consolidation in credit cards as the number of individuals holding multiple cards has come down. "Customers are realizing the benefits of maintaining a singlecard. Also with the Credit Information Bureau (CIBIL) in place, banks are able to select customers more carefully." He said this was a healthy trend. "When credit card issuance was at its peak at around 2.7 crore cards in 2008, the average annual spend was around Rs 13,000 per card. This has now gone up to over Rs 50,000. With acceptance going up, the average card spends should also rise," hesaid. Bankers say that shifting payments to the electronic mode not only saves RBI thousands of crores in printing currency, it also increases tax compliance. According to Nayak, the key to increasing usage of cards is the increase in acceptance.

Global gang skims Indian credit card industry of Rs 30 crore in 2 months

Mayur Shetty, TNN | Feb 6, 2013, 12.23AM IST MUMBAI: The credit card industry in the country has been hit by a series of frauds over the past couple of months, a scam which could potentially impact a large number of credit card users in days to come. Top card issuing banks have seen unauthorized transactions totalling around Rs 30 crore so far by an international syndicate, which bankers believe is capturing card information through retail outlets that have been compromised. The most disconcerting part is that banks have not been able to identify the establishments or the machines which are swiping card information. A couple of banks that TOI spoke to suspect the theft could be taking place in swipe machines in departmental stores that have been accessed by hackers and compromised to read and transmit credit card information. All top credit card issuers ICICI Bank, HDFC Bank, Citibank, SBI Cards and Axis Bank have been affected by these frauds. Here is how it works. After accessing the credit card information, the hackers use it internationally for online transactions. There have been cases where cards have been cloned and used for transactions in shops. "We have seen cloning happening when cardholders travel to some global destinations that are notorious for cloning. Now we are seeing this happen with cards where the holder has neither travelled abroad nor used it for online transactions," said a bank official. Although fraudulent transactions in India have shrunk dramatically with the introduction of 3D security, the weak link is international transactions. In India, a user needs the cardholder's name, expiry date and CVV number (the three-digit number on the back of your card) plus the online banking password or one-time password for online

transactions. Internationally, the transactions are done on the basis of credit card information alone. There is, however, hope for consumers who have been cheated. Banking sources say where it is established that the consumer is not at fault, they don't have to bear the loss. However, there is substantial inconvenience to the consumer as the amount is kept pending until investigations are complete. Banks on the other hand may have to reissue thousands of cards which have been compromised and replace existing cards much ahead of their expiry date. In some cases the card issuing banks are protected by insurance if the fraud amount crosses a certain level if they have purchased covers. The bank's contracts with the credit card payment companies Visa and MasterCard also provides for reversal of charges if the merchant has not taken precautions. "ICICI Bank has noticed that certain fraudulent transactions have taken place in the last few weeks across some overseas merchant terminals on credit cards that have been skimmed. This is not specific to ICICI Bank; it's across the credit card industry. ICICI Bank has taken measures to protect its customers whose credit cards might have been compromised, by issuing new cards to them," ICICI Bank said in a statement. Although RBI does not investigate these frauds, it does prescribe standards for the card industry. To enhance security features the central bank has asked banks to move to chipbased cards by June 2013 for those who use cards in international transactions. RBI has also said that it will decide whether to make chip-based cards mandatory depending on the progress of Aadhaar, which if successfully rolled out, would provide another level of security through biometric identification. Bankers said that it was not possible to classify all the contested transactions as fraudulent. "We have had cases where the cardholder could not identify the name of the company in his billing statement. But that customer apologized later when he recalled the transaction," said a bank official. They said that the true extent of fraud could be known after each case is investigated. Citi, another large issuer which has also been hit by such frauds, did not comment on the magnitude of such cases. "Citibank is committed to providing enhanced security for customer transactions across all channels, including credit and debit cards, at all times. In keeping with this objective, Citibank is amongst the first banks to issue Chip + PIN credit cards in the country for higher security. The bank has also invested in robust controls including advanced transaction monitoring system (with real-time monitoring capability), process of call back to customers for high-risk transactions, proactive reissuance of cards at risk as well as conducting regular customer and merchant education programmes," Citi said. IndusInd Bank, meanwhile, has experienced a fraud on its pre-paid card. The fraud was a result of hacking the Electronic Clearing System using a malware. The bank believes

the hacking to be the work of an international fraud syndicate. "There is no impact to any of our customers. Themalware has been identified and removed. External consultants have been hired to investigate this incident and steps taken to secure their systems basis advice from them. Monitoring controls have been enhanced including using the fraud prevention systems of the Associations" a spokesperson said. According to SBI Cards, the company immediately blocks a card when it gets information on a fraud. "We analyze and try to identify a common fraud and tend to narrow down on the possible compromise point and subsequently block the suspected merchant to pre-empt any further misuse or fraudulent activity," it said. It added that it also informs the payment network (Visa and MasterCard).

How credit card companies are making a comeback

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Source: Moneycontrol.com

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Sagar Salvi moneycontrol.com

After the initial boom period of 2004 to 2006, the Indian credit card industry had its bubble burst in 2007-09. However, it seems like the tide is turning with the sector witnessing a dramatic drop in credit card defaults in the last one year.

According to data compiled by the Credit Information Bureau of India (Cibil), financial health of average individual borrower has risen. The data shows that the proportion of borrowers with a credit score of more than 800 has gone up from around 23% in 2008 to over 62% in 2011.

Credit score is a ranking drawn up by Cibil, the largest repository of borrower information in the country, which ranges from 300 to 900, with 900 being most creditworthy.

In the last one year, the percentage of cardholders who have not met their payment obligations for more than 90 days has dropped from 2.82% in the fourth quarter of 2010 to 1.62% in Q4 2011. The significance of 90 days is that the Reserve Bank of India requires banks to classify loans that are not repaid in 90 days as non-performing assets.

This is a marked turnaround for a business which has been hit by defaults since the 2008 global financial crisis and many banks have got out of the personal loan space completely.

Besides a fall in defaults, cardholders are using their cards for a 30% higher value.

LOWER DEFAULTS

According to SBI Cards, the country's third largest issuer of credit cards, increased awareness and focus on profitable growth has paid rich dividends. "Credit card issuers are relying a lot on bureau data, which has improved dramatically. This has reduced the scope for delinquencies significantly. The irrational exuberance that we saw in 2008-09 no longer exists. Banks are adopting a more calibrated approach in growing their card portfolios," Kadambi Narahari, chief executive officer of SBI Cards told moneycontrol.com.

Also, SBI Cards is careful in enrolling new customers and selling to existing accountholders. "We charge an annual fee ranging from Rs 499 to Rs 2,999 to our customers on all our cards. This helps us weed out serious users from the non-serious ones," Narahari says.

The fact of the matter is people have realised the importance of keeping a good credit score, believes Sanjeev Jain, CEO, GE Capital Business Processes Management Services -- SBI Cards joint venture partner. "We have had customers asking us to clean their credit history of an eight-10 year old default as they were unable to avail a home or a car loan because of it," Jain says.

However, having only "good" customer means company margins come under pressure, where the real money is made on penalties.

CUSTOMIZED PRODUCTS

Besides keeping an eye on who they are dealing with, card companies have also come out with customer-specific products. "For example, if a customer uses his or her card more for eating out, we give them offers related to dining out. If a customer uses the card more to book travel tickets, we offer them cards designed for frequent flyers," Narahari says.

Another hit has been the corporate cards. "Companies have found corporate cards a great way to manage cash," Jain says adding, it also cuts down on reckless spending by its executives.

Secured cards have also started to gain traction. Basically, what they do is offer customers, who otherwise are not eligible, credit cards based on their fixed deposits with State Bank of India.

"We offer up to 80% of the amount of the fixed deposit to the customers. This strategy removes any scope of delinquency in these accounts. We are also offering cards without a security in areas that we call project towns. We are issuing these cards to corporate employees working in small towns and cities provided the company has very good relationship with us," Narahari explains.

Secured cards have formed 10% of SBI cards total portfolio.

'REAL GROWTH IN TIER II & III CITIES'

Credit cards are meant for the urban population. That was the popular belief among most industry watchers and market analyst. However, that is not the case now. Products such as secured cards and aggregation of demand have led to a spike in card holders in tier II & tier III cities. Also, the thriving retail scene has also helped the demand in such cities.

"The ability to source clients, service them and recover the money holds back most issuers from offering credit cards in deeper geographies. We have expanded our portfolio in tier II and III centres in the past 12-18 months. In many of these locations we are offering credit cards against security. So, if you have a fixed deposit with SBI we will offer you a credit card," Narahari says.

In fact, the SBI Card chief expects growth in these small towns to outpace thier urban counterparts. "We are also targeting people who have just joined work. We call them the emerging segment. These are people who have the potential to become good customers in future. Hence, we want to partner them in their early life," he says.

SBI Cards, which has a base of 2.2 million cards, hopes to add 1 million new card holders by 2014-15. It is also launching a new high end signature card for HNI customers shortly.

TRIGGERS

A big trigger for SBI Cards has been the use of the short messaging service or SMS. "Every time our customer makes use of our card, he immediately gets an SMS on the transaction no matter how small it is. This gives a sense of security to the user and helps him track of his account. Mobile commerce has been a big growth driver for us," Narahari says.

Security mechanism on the cards has also been upgraded so as to prevent unauthorized transactions. The Reserve Bank of India has mandated card companies to migrate to the high security EMV platform by 2014. This is likely to drastically bring down credit card frauds.

The recent White Paper on black money tabled in the Parliament by the finance minister suggested tax incentives for encouraging use of debit and credit cards as these leave audit trails.

You could be the next victim of credit card scam in days to come. The credit card industry in the country has been hit by a series of fraudulent international transactions amounting to of India. 30 crore during the past 2 months. These scams would potentially

impact a large number of credit card users in the nation, reports Mayur Shetty for Times

The other distressing element of these financial scams is that banks are finding it difficult to identify the establishments or the machines which are swiping card information. However, they suspect departmental stores which use swipe machine and probably allow hackers to access and transmit credit card information of the customers.

All top credit card issuers like ICICI Bank, HDFC Bank, Citibank, SBI Cards and Axis Bank have been affected by these scams.

More: 10 Car Insurance Cost Cutter

How It Works?

Once when the hackers get an access to credit card information, they use it globally for online transactions. Surprisingly in some cases, hackers go to the extent of cloning the cards and then they use it for transacting in shops.

"We have seen cloning happening when cardholders travel to some global destinations that are notorious for cloning. Now we are seeing this happen with cards where the holder has neither travelled abroad nor used it for online transactions," said a bank official, as quoted by TOI.

Even though the number of fraudulent transactions taking place within India has reduced dramatically with the introduction of 3D security, the international transactions still pose a great threat. In India, for performing any online transaction a user needs the cardholder's name, expiry date and CVV number in addition to the online banking password or one-time password. On the contrary, for conducting any international transactions, one only requires credit card information.

INTRODUCTION The Indian banking has now been shifting towards new age of banking which includes more use of technology The term electronic payment is a evidence of changing banking industry. Today many new services are being adding in to various service provided by banks. The one of the most popular service provided by banks is credit and debit card facility. It is the in this series of technological wonders in the recent past. Banking is now no longer confined to the branches were one has to approach the branch in person, to withdraw cash or deposit a cheque. In the last two years, spending pattern through plastic money has changed drastically. Traveling, dining and jewellery are the top three purchases that Indians make through credit cards. Two years ago, it was jewellery and apparel purchases that formed the largest chunk of purchases through plastic money. Fuel accounts for a very small portion of credit card purchases as these are largely paid through debit cards.

CREDIT CARD

A credit card is a system of payment named after the small plastic card issued to users of the system. The credit card is a payment card issued to a person for purchasing goods & services & obtaining cash against a line of credit establishment by the issue. A credit card makes it easy to buy something now & pay for it later its much safer to use a credit card than to carry around cash. A credit card is different from a debit card in that it does not remove money from the user's account after every transaction.

TYPES OF CREDIT CARDS

Premium Credit Cards

Premium credit cards include Titanium, Platinum and Signature credit cards. These credit cards offer very high credit limits, personalised service, insurance cover and low interest rates.

Gold Credit Cards

Gold Credit Cards offered by banks in India. They offer higher credit limits and exclusive service. Features include aiport lounge access, insurance benefits and more.

Silver/classic Credit Cards

Silver/Classic credit cards offer reasonable credit limit at low or no annual fee. Features include fuel surcharge waiver, and more.

Balance transfer Credit Cards

Credit cards offered by Indian banks that provide balance transfer options. Balance transfer cards offer a limited period of low or no interest fee to transfer your balances from a higher interest rate to a lower interest rate saving you money.

Low interest Credit Cards

Credit cards offered by Indian banks with low interest rates. They offer lower interest rates per month/year. Rewards Credit Cards

Credit cards with shopping rewards. Reward partners include retail outlets, hotels, restaurants and more.

Cash back Credit Cards

Credit cards with cash back facility. These cards offer a percentage of your spend as cash back to your account.

Airline Credit Cards

Credit cards that offer airline miles and free air tickets. Airline partners include kingfisher, Jet Airways, Indian Airlines, Air Deccan, Lufthansa and more.

Business Credit Cards

Credit cards that have special features for business use. They offer EMI options, loans, higher credit limit, higher credit period and many more options.

Co-branded Credit Cards

Co-branded credit cards offer special rewards with partners. They offer special discounts, extra points and special gifts. Co-brand partners include airlines, retailers, mobile operators and many more.

Travel(dollar) Credit Cards

Travel Cards are prepaid cards that can be used for travel purposes. They can be used like a credit card at merchant establishments and ATM's. They offer a good alternative to carrying tarvellers checks and cash while traveling abroad.

Charge Credit Cards

Charge cards have no pre-set spending limits but require you to pay off your balances at the end of the month. They have no interest rates or service charges unless you delay your payments. Banks like American express in India offer these cards.

Other Credit Cards

Check out these credit cards that offer other benefits like cashless medication; club discounts exclusive credit cards for women and more.

Lifetime free Credit Cards

Lifetime free credit cards come to you absolutely free with no annual fee. Free for life credit cards may require a minimum spend per year in order provide the card free of cost. Please refer to the terms and conditions of these offers with the respective banks.

Why does credit card fraud matter? The Federal Trade Commission estimates that 10 million people are victimized by credit card theft each year Credit card companies lose close to $50 billion dollars per year because of fraud These costs trickle down in higher interest rates and fees for all consumers ID thieves harm victims by: using their names and other personal information to open new credit accounts accessing existing credit and bank accounts to make unauthorized purchases Victims of ID theft are not held liable for losses, but it takes time and effort for victims to prove fraud and clean up the chaos Skimming When dishonest employees make illegal copies of credit or debit cards using a skimmer device that captures credit card numbers and other account information The stolen credit information is used to make purchases by phone and internet, or to make counterfeit cards Security Codes Credit card companies use security codes to help prevent unauthorized or fraudulent use by phone and online These numbers help ensure that you have the card not just the account number Merchants are prohibited from keeping or storing any security codes after transactions are completed

Spotlight on security as credit card frauds soar

Complainants point out many of them havent used the cards for international purchases; holders put the onus on banks
Anup Roy | Joel Rebello

First Published: Wed, Jan 23 2013. 11 15 PM IST

The complaints posted on the governments customer grievances site, Grahak Seva , have been rising steadilysince November. Photo: Ramesh Pathania/Mint

Updated: Fri, Jan 25 2013. 04 07 PM IST Mumbai: Indian credit-card holders are increasingly becoming the target of online fraud with thieves using the cards frequently on online sites abroad, raising questions about how secure bank data is and why they seem reluctant to crack down on the leaking of customer information even when alerted to such crimes as soon as they happen. Not only that, the redressal appears to be a convoluted process. Unlike in some countries, there is no immediate reversal of the charges. And when the money is restored, customers must sometimes bear a part of the sum, thereby ending up paying for the crimes of which they were the victims. Thats besides the inconvenience of having the cards replaced, a process that can take days. Holders of cards, issued mostly by private and foreign banks in India, come to know they have become the latest victim of such fraud when they get text messages alerting them to transactions in their name in some distant country in currencies including pounds, euros, dollars, roubles and kronor.
ICICI Bank Ltd, the countrys largest private sector lender, seemed to be the worst affected.

The complaints, posted on the governments customer grievances site Grahak Seva, have been rising steadily since November last year. In August and September, the websites of Amazon.com Inc. and Apple Inc. were hacked and more than one million card details sold off to others who sought them with the intent to commit fraud. Users register credit cards on the sites for a smooth online purchase process. In some cases, such registration isnt optional. But, as the complainants point out, many of them havent ever used the cards for international purchases; so the leaks have come from elsewhere, with the holders putting the onus on the banks own security apparatus. No bank has been spared. Victims in the last few months include holders of cards issued by Standard Chartered, Citibank, HDFC Bank and ICICI Bank, apart from others such as SBI
Card. The latter is a joint venture between the countrys largest lender, State Bank of India, and

GE Capital. As for ICICI Bank, fraudsters seem to have a particular fondness for cards starting with the digits 4477. ICICI Bank has already examined these transactions, the bank said in an email. They are not

just specific to ICICI Bank and have taken place on sites which do not have 3D Secure authentication protocol. The bank confirms that all e-commerce transactions on sites located within India are protected by 3D Secure authentication protocol which has been mandated by RBI. 3D Secure is an additional authentication process thats required for online transactions in India. Many of the purchases have been made at a Swedish merchant that goes by the name of Comviq Vesta since mid-January. An HDFC Bank spokesperson said its looking into the matter and offered no further comment. SBI Card was the only issuer to answer queries in detail, confirming that it has received complaints against fraudulent transactions. So far we have received a few complaints from our card holders for fraudulent transactions with the Swedish merchant Comviq Vesta, SBI Card said in an email. As the merchant is based overseas, the additional authentication is not required, SBI Card said. That makes fraud easier. In the US and elsewhere, transactions dont require this. As a process, we have a financial recourse to the merchant/acquirer through a charge back process, SBI Card said. This will ensure that the card holders are not held liable to pay for the disputed transactions. In the interim, till the card holders disputes are settled in their favour and

we receive the money on the disputed transactions from the respective merchant/acquirer, we can extend a temporary credit to the card holder, said SBI Card. SBI Card added: We have also blocked this merchant (Comviq Vesta) so that no more card holders are

"Clarification "
In response to this story, Vesta Payment Solutions Ltd said, Once our systems detected a pattern of usage outside of expected parameters, we immediately prevented such cards from being used to attempt adding credit to mobile phones. Richard Hanlon, director, Vesta Payment Solutions, added, We are the victim of the fraudulent activity. Mint had sought the comments of the company before the storys publication.

inconvenienced with such instances. The company denied its servers have been compromised. As part of its investigation, SBI Card has informed Visa as well as MasterCard about such disputes so that the card issuers can investigate the matter. Comviq is a Swedish mobile telecom provider and is owned by Tele2, a European telecom services provider. It is not clear if Comviq Vesta is part of Comviq. An email sent to Comviq was not replied to. The same merchant received payments in fraudulent transactions using HDFC Bank cards in November and Citibank in December. In December, a website, www.Rzd.Ru, originating from Russia, began cropping up in complaints. The victims were holders of credit cards issued by ICICI Bank and Citibank, with as much as Rs.50,000 being siphoned off from each customer. Citibank customers were among those that fell prey to a UK-based merchant called Entropay. To be sure, cards have also been used fraudulently at such reputed merchants as Best Buy in the US. In most cases, the money is relatively small, unlike high-value global hacking frauds. According to Sanjay Sharma, MD and CEO of IDBI Intech, a banking platform provider, bank servers may not have been hacked but individual cards may have been compromised by vendors and passed on to international hackers. In East Asian countries, this practice is prevalent. If you visit these countries and swipe your card, all the information is registered and can be passed on to sites that dont require secondfactor authentication, he said. The reason why the transactions are of relatively small value could be because higher sums sometimes trigger a phone call from the bank to authenticate the transaction, said Sharma.