Under the new guidelines,<\/a> digital transactions will require two-factor authentication (2FA), with at least one dynamic factor\u2014such as a one-time password (OTP), biometric verification, or device-based authentication. This goes beyond the current reliance on OTP-only systems, which industry players say are vulnerable to phishing and SIM-swap attacks.
The RBI\u2019s approach is also notably less prescriptive. Instead of mandating specific technologies, it focuses on outcomes\u2014allowing banks and fintech firms to deploy a mix of tools such as biometrics, tokenisation, device binding, and risk-based authentication models.<\/p>\nWhy now?<\/p>\n
Industry experts point to the scale of growth in digital payments as a key driver. As adoption expands, so do threats like unauthorized access and social engineering frauds.<\/p>\n
Prakash Ravindran, CEO & Director at InstiFi, said the new framework reflects a broader shift in how trust and security are managed. He noted that layered authentication will help reduce fraud risks while creating a safer operating environment for merchants.<\/p>\n
Similarly, Amit Kumar, CTO & Director at Easebuzz, described the move as timely, given the simultaneous rise in transaction volumes and fraud attempts.<\/p>\n
He added that stronger authentication could enhance consumer trust, even if it introduces slight friction in transaction flows.<\/p>\n
Impact on banks, fintechs, and merchants<\/p>\n
A key feature of the new rules is increased issuer liability. Banks and payment providers will be held accountable in cases of non-compliance, effectively making strong authentication mandatory rather than optional.<\/p>\n
Harsh Vardhan Masta, Head of Payments at Policybazaar, said this shift would push institutions to adopt stricter transaction processing standards while ensuring quicker compensation in fraud cases.<\/p>\n
For merchants\u2014especially small and medium businesses\u2014the changes are expected to reduce risks related to disputes, financial losses, and reputational damage, thereby boosting confidence in digital payments.<\/p>\n
Balancing security and user experience<\/p>\n
While stronger authentication improves safety, it can also add friction to the payment process. To address this, companies are expected to adopt risk-based authentication, where the level of verification depends on factors such as transaction value, user behavior, and device details.<\/p>\n
This means low-risk transactions may remain quick and seamless, while high-risk ones undergo additional checks.<\/p>\n
The bigger picture<\/p>\n
The RBI\u2019s new framework signals a transition from rule-based compliance to principle-driven regulation, encouraging innovation while setting a baseline for security.<\/p>\n","protected":false},"excerpt":{"rendered":"India\u2019s digital payments ecosystem is set for a significant security upgrade as the Reserve Bank of India (RBI)…\n","protected":false},"author":2,"featured_media":568266,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[16],"tags":[49,48,218725,218728,218723,218727,190,218722,218729,218724,218726,61],"class_list":{"0":"post-568265","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-mobile","8":"tag-ca","9":"tag-canada","10":"tag-dynamic-authentication-factors-otp-biometrics-device-based","11":"tag-fraud-prevention-in-indias-digital-payment-ecosystem","12":"tag-india-digital-payments-security","13":"tag-issuer-liability-in-online-transactions-india","14":"tag-mobile","15":"tag-rbi-digital-payments-authentication-norms","16":"tag-rbi-regulations-for-banks-fintechs-and-merchants","17":"tag-rbi-two-factor-authentication-guidelines","18":"tag-risk-based-authentication-in-digital-payments","19":"tag-technology"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/568265","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=568265"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/568265\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/568266"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=568265"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=568265"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=568265"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}