Cross-Border Ecommerce Country Report India

Home , Mobile payments in India, Mopay, Oxigen Services

INDIA

CROSS-BORDER ECOMMERCE REPORT CRITICAL FACTS AND INSIGHTS FOR INTERNATIONAL EXPANSION 2 CROSS-BORDER ECOMMERCE REPORT INDIA

1. Introduction 3 1.1. What’s Included in Each Country Report 3 1.2. Our Methodology 4

2. Ecommerce Facts and Figures in India 4

3. Cross-border Ecommerce Opportunities 8 3.1. Language as a Key Driver 8

4. Industry Trends in India 9

5. Preferred Payment Methods in India 10 5.1. Domestic and Preferred Card Schemes 10 5.2. Alternative Payment Methods 11 5.3. Preferred Online Payment Methods 12

6. Mobile Payments in India 12 6.1. Mobile Operator Payments 14 6.2. Mobile Payments Initiatives 15

7. Payment Service Providers 16 7.1. Major Acquirers in India 17

8. Ecommerce Fraud and Online Fraud Prevention 17 8.1. Payment Fraud Profile 17 8.2. Ecommerce and Mobile Fraud Prevention 18

9. Sources and References 19

1. Introduction

In October 2013 the Cross-border Ecommerce Community was launched (http://www.crossborder-ecommerce.com). The co-creators and partners in this initiative believe that we are stronger collectively, when we bundle our knowledge. We provide facts and figures on mature and emerging markets, preferred payment methods, logistics, risk and fraud, as well as ecommerce legislation and regulation. Our community is designed to become the industry’s knowledge hub offering a deeper understanding of the various influences in ecommerce. We provide key insights that can result in exciting initiatives and ultimately lead to international expansion for the benefit of all stakeholders within the global dynamic of ecommerce.

More than ten thousands reports have been downloaded since the beginning of the CBEC initiative, which is indicative of the high market interest in such comprehensive intelligence. The feedback and response we have received have been really positive and we are happy to see that our reports have successfully addressed the market need.

We are committed to investing further effort, resources and time not only in extensive research, but also in publishing

the updated versions of the reports based upon 2013 data.

The diversity of payment methods, coupled with developing cross-border business models are considered key to building and increasing your business. We address the markets need for more clarity and guidance by generating valuable content on mature and developing markets which is a great asset in strategic decision making and corresponding approaches. We share need-to-know insights, well documented research papers, industry reports and info-graphics that highlight global opportunities creating a profitable cross-border ecommerce platform for businesses to grow.

1.1. What’s Included in Each Country Report A clear and comprehensive overview of the ecommerce and online payments platform, which includes updates on the most relevant industry indicators and country specifics: • Ecommerce facts and figures • Cross-border ecommerce • Industry trends • Preferred payment methods • Mobile payments • Payment service providers • Ecommerce fraud and online fraud prevention

1.2. Our Methodology In this analysis, we rely mainly on secondary research from multiple sources, including: Internet World Stats, Eurostat, MarketResearch, consultancy firms, card schemes and ecommerce associations. We then combine this with primary research from industry thought leaders, payments as well as fraud experts within our CBEC partners, with very solid knowledge about the local/regional online payments and the ecommerce landscape. In addition, we use our own resources and skill sets to provide clarity whenever we come across conflicting data records, facts and statistics collected from multiple sources. Lastly, it is important to mention that these reports are based upon data from 2013, unless otherwise stated.

There are significant variations in ecommerce development and the use of online payment methods across countries, with transactions ranging from small values to substantial sums, initiated via a range of payment instruments and driven by different business models. As ecommerce (and implicitly online payments) development is driven by country specific factors, and also registers different growth levels, data availability varies significantly between countries. Some of them have various organizations/market research firms/indexes that publicly and consistently reveal ecommerce-related data. Other countries are presented with the challenge of a language barrier, making data gathering and reliability more

difficult. Therefore, in some cases we had to gather our information from unrelated data sources.

By bringing together and sharing expertise from multiple sources we hope you will gain a thorough understanding of the different influencing factors that shape the ecommerce dynamics and will help you keep up with the growing consumer demands in this ever changing marketplace. Success depends on knowing how to engage customers in today’s global, omni-channel commerce reality.

2. Ecommerce Facts and Figures in India

Standing on the second place in the top of the countries with the largest population in the world, Indian ecommerce market holds significant potential as only 2% of the population shop online. However, India’s ecommerce potential, especially in cross-border trade, is limited by low urbanisation, internet penetration and income levels. Mobile, however, could be the key to unlock this market – smartphone penetration is growing at 150% year on year.

• Total Population - 1.26 billion - Second largest in the world, after China.

• Age Breakdown - Under 13% of the population of India are over 55.

Age Breakdown in India

5.7% 7.0%

28.5%

■ 0-14

■ 15-24

■ 25-54

■ 55-64

■ 65 and over 40.6% 18.1%

CIA World Factbook

• Religion - India is largely Hindu, at 80.5% of the population.

Religions of India (%)

None (0.1%)

Other (1.8%)

Sikh (1.9%)

Christian (2.3%)

Muslim (13.4%)

Hindu (80.5%)

CIA World Factbook

• Urban Population - 32% • Internet Penetration - 243 million people - 19% penetration - Over 90% of internet subscriptions registered by the end of 2013 were mobile connections. • Mobile Penetration - 899 million - 71% • Tablet Penetration - 9.3% • Smartphone Penetration - 10% - The penetration rate is growing at 150% year on year. • Online Shoppers - 25 million • Ecommerce Sales - USD 14.9 billion (including e-retail and ecommerce). - Average order value increased from USD 17 to USD 30 from 2012 to 2013. • Ecommerce Penetration - 11,5% • Ecommerce CAGR (2008 – 2013) - 21.7%

• Mobile Commerce - Analysts forecast the mobile commerce market in India to grow at a CAGR of 71% over the period 2012-2016. - More than half (53%) of online consumers in India make mobile purchases for entertainment services, cinema, theatre shows, DVDs, sport games. - Mobile commerce contributes 3% of total ecommerce, approximately USD 450 million - Mobile commerce grew 800% from 2012 to 2013.

Most Popular Mobile Purchases (% of shoppers)

E-books (40%)

Clothes/footware/other attires (47%)

Music Downloads (48%)

Entertainment services (53%)

India Retailing – M-commerce: Driving the Ecommerce Revolution in India 2014

• Mobile OS Platforms - Android is the preferred mobile operating system in India at 84.7%.

Preferred Mobile Operating Systems in India

0.6% 2.5% 0.5%

11.7%

■ Android

■ iOS

■ Blackberry RIM

■ Windows

■ Other

84.7%

Kantar World Panel, 2014

3. Cross-border Ecommerce Opportunities

• The lion’s share of India’s cross-border ecommerce trade is export, as India is considered to be a tricky location for import. This is due to limited infrastructure and urbanisation. Moreover, there are restrictions in place limiting foreign direct investment (FDI) and cross-border trade. • In spite of the FDI restrictions, major players such as Amazon have entered the Indian market, forced to operate as wholesale companies and act in legal partnership with locally-based retailers. • Shopify, the Canada-based shopping cart, expects to double the number of stores operating on its platform in India, from 5.000 to 10.000 in the next year, representing potential for Indian ecommerce. • Indian merchants generated USD 1.8 billion in value in 2013 in cross-border export of ethnic wear, handicraft, leather fashion accessories and semi-precious jewelry. • The US, UK, India, Russia and Israel are major export destinations for Indian merchants selling online while China, Germany, Malaysia and Singapore are preferred import hubs. Indeed, 2.3% of China’s cross-border ecommerce export trade was to India.

Indian Consumers Purchasing Cross-border (%)

the USA (66.4%)

the UK (24.2%)

China (22.4%)

Hong Kong (11.0%)

DHL – Shop the World! Consumer attitudes towards global distance selling, 2014

• The Reserve Bank of India has raised the financial limit for online transactions from USD 3.000 to USD 10.000, giving more scope for high-end, luxury items.

3.1 Language as a Key Driver • The national languages of India are Hindi (41%) and English (20%). • There are 350 million English speakers in India. • There are 422 million Hindi speakers in India. • Other languages include Bengali, Telugu, Marathi, Tamil, Urdu and Gujarati. • The percentage of English speakers varies with age. The English speaking ratio is higher among the younger population. In most middle class families, parents may not be English speakers but the children are.

4. Industry Trends in India

• Online retail constitutes only 0.4% of India’s total retail market, expected to increase to 3% by 2020. • Only around 35% of Indians have access to bank accounts and even those who do possess debit or credit cards are wary of using them online. • Industry studies indicate that online travel dominates the ecommerce industry with an estimated 70% of the market share. • 60% of Snapdeal customers pay with cash on delivery. • In the internet retail sector, the top category in India is consumer electronics and video games, with almost 741 million value in 2013.

Most Popular Online Retail Categories in India

In USD millions

Traditional Toys and Games (2.8)

Media Products (268.0)

Consumer Appliances (85.4)

Consumer Healthcare (20.2)

Consumer Electronics and Video Games Hardware (741.3)

Apparel and Footwear (276.3)

Beauty and Personal Care (3.8)

800 700 600 500 400 300 200 100 0

Euromonitor International – Internet Retailing in India, 2014

• Dell had the largest value share percentage of online retail in India in 2013, accounting for 8%. • The value of goods sold by Amazon India in a year topped USD 1 billion. Fashion was one of the fastest growing categories.

Major Online Retailers in India

In % value share Dell (8.0%)

Flipkart (4.9%)

Myntra (4.1%)

Jabong (2.2%)

Snapdeal (1.5%)

Amazon (1.4%)

Ebay (1.2%)

HomeShop 18 (1.0%)

Indiatimes Shopping (0.8%)

Sify (0.5%)

Euromonitor International – Internet Retailing in India, 2014

5. Preferred Payment Methods in India

5.1. Domestic and Preferred Card Schemes • Visa has the lion’s share of the credit card market in India, with 68%.

Credit Cards in India

2.3%

5.6%

23.8% ■ Visa

■ MasterCard

■ American Express

■ Other 68.3%

Euromonitor International – Credit Cards in Australia, 2014

5.2. Alternative Payment Methods • Debit Card: a type of payment card which is tied to a normal bank account (checking, savings or payroll account). Whenever cardholders pay by using their debit card, their bank account balance gets deducted. If there is an insufficient balance on the cardholder’s account, then the transaction, usually, gets declined.

• E-Wallet: service in India which is offered by companies such as PayPal, ITZ Card and OxiCash. The service providers also offer money transfer from the consumer’s account to any accredited merchant bank in India. The e-wallet component of their service works the same way as traditional e-wallet service. End-users can reload their e-wallet account via card payment, cash payment or electronic fund transfer from the end-user’s bank account to their e-wallet account. Their e-wallet can then be used to purchase goods or services online or offline.

• Prepaid Card: a payment card where a value or cash equivalent has been loaded into the card prior to spending. Once a cardholder uses a prepaid card for purchases, the amount that was “pre-loaded” onto the card will get deducted with the amount of the item or service being purchased. To use it again, the cardholder will need to load up the prepaid card or buy a new pre-loaded card. A prepaid card is different from a debit card since a

debit card is tied to a bank account.

• Online Banking: a form of payment by which customers are able to make online transactions such as bills payment, fund transfer and other internet banking services via their bank’s online facility.

• Cash on Delivery: lets customers pay for their purchases by cash upon delivery.

• OxiCash: a payment platform that enables mobile users in India to use their mobile phones as wallets to pay for services like mobile recharges, DTH TV recharges, electricity bills, movie tickets, rail tickets , air tickets, hotels etc.

• ITZ Card: a simple prepaid mobile recharge voucher that works on the principle of ‘Pay now and Use at your convenience’. It gives the convenience of a reliable payment method that can be carried anywhere without actually carrying any cash.

5.3. Preferred Online Payment Methods

Preferred Online Payment Methods in India

3% 3% 4% ■ Credit and Debit Card

6% ■ Paypal

34% ■ Cash or Cheque 6% ■ Bank Transfer

■ Prepaid Card 6% ■ Other Money Transfer e.g. Western Union

■ Prepaid Voucher 8% ■ Other

6% ■ ITZ Card

■ OxiCash 24%

DataMonitor Financial

Find out more about online payment methods in India and how to increase conversion.

6. Mobile Payments in India

The Indian mobile payments market has been particularly attractive for investors and a handful of Indian start-ups tapped into this market in the last couple of years. The interest in delivering new options to pay is thought to start off with India’s population who, albeit having access to bank accounts, is still inclined to use traditional methods (cash or cheques) to pay.

Because the banking services available on mobile phones (in India) are fairly limited and the number of people having access to financial services continues to be very low, India is believed to have a tremendous potential to offer.

A government-driven initiative enabling an interbank electronic fund transfer service through mobile phones is IMPS (Immediate Payment Service). IMPS can be used for both customer to customer transfers and merchant transfers through a seven digit number, which is actually the MMID, and also a mobile banking personal identification number (MPIN). A mobile payment transfer is facilitated when the transfer initiator has fed in the receiver’s mobile number, MMID and the value to be to be transferred along with the MPIN details. Post transfer: an SMS confirms the transaction. The daily limit for such transactions is set at INR 50.000 (approximately USD 808).

According to data from November 2014 provided by NPCI (National Payments Corporation of India), IMPS witnessed a 22% growth between August and September 2014. There was also a 6% increase in total number of mobile money IDs (MMID) issued during that period.

In March 2014, Mahindra Comviva, a global provider of mobility solutions, launched its mobiquity Wallet, a platform designed to transform the banking experience. The solution is designed to be flexible and is one of the first wallet platforms to use NFC – SE and HCE, QR Code, biometrics and BLE. It enables remote and proximity payments with support for in-app purchase, as well as mobile and web checkout.

mPOS Although cash is still prevalent, a handful of companies started to focus on enriching the point-of-sale (POS) or the point at which a customer makes a payment to a merchant in exchange for goods or services and, taking the high mobile penetration in the country, mobile POS seems to be a good fix for a huge pain-point for Indian small and mid- sized merchants.

Besides the mobile wallet offering, Mahindra Comviva also provides a mobile POS solution, payPLUS, which enables merchant acquirers to minimise infrastructure investments on POS systems, yet equip all of their merchant partners with solutions that cater for the evolving demands of consumers. Enabling merchants to accept card payments by using just their mobile phones, payPLUS allows small, medium and large enterprises alike to be equipped with a payment acceptance system.

Mswipe launched a mobile POS solution in India in 2012 with a card reader which can be attached to any mobile phone’s audio input jack. With Mswipe’s mobile swiper, merchants can make their mobile phones to accept card payments. The device can be activated in three steps: it requires to be plugged into the audio jack of the phone, launch the application and swipe. Mswipe works with about 7.000 merchants in India and Sri Lanka. Additionally, in December 2013, the Mswipe team launched an EMV compliant mobile POS solution dubbed Wisepad. It is Bluetooth- enabled and requires no physical connection to the phone. Besides enabling cash transactions, it also allows the merchant to cancel unsettled transactions, review the last 30 transactions and check the day’s summary.

Ezetap Mobile Solutions was founded in 2011 and, similar to other companies already mentioned, its solution turns merchants' mobile device into a point-of-sale that is able to read cards and complete a range of financial transactions, including credit card sale, bill payment and ATM cash withdrawals or deposits.

6.1. Mobile Operator Payments The top three Indian mobile operators, Bharti Airtel, Vodafone and Aircel, are all involved in mobile payments projects. • In April 2014, telecom operator Vodafone, in collaboration with financial institution ICICI Bank, completed the pan-India rollout of M-Pesa. The mobile wallet platform enables customers to deposit and withdraw cash from designated outlets, transfer money to mobile phones or remit money to bank accounts in India, make payments to recharge mobile phones, clear utility bills and DTH service subscription. • ICICI Bank entered an agreement with mobile network operator Aircel and Visa in February 2013 to launch the Mobile Money mobile banking service. The service enables customers to transfer money through their mobile phones without getting connected to data services. Mobile Money provides customers with financial services, including deposits and cash withdrawals, money transfer to third-parties, self-reload of prepaid mobile credit and utility bill payments. • In February 2012, Bharti Airtel, through its wholly owned subsidiary, Airtel M Commerce Services, (AMSL), launched airtel money, a mobile wallet service which allows its users to load cash on their mobile devices and spend it to pay utility bills and recharges, shop at merchant outlets, transact online etc. Apart from serving as an alternative to cash / card payment options, airtel money also allows customers to transfer money from an airtel

money wallet to another airtel money wallet and bank accounts.

Direct Carrier Billing The purchase of digital goods via the mobile phone bill is also an attractive space for companies seeking to establish their presence in the Indian market. Direct carrier billers have shown a particular interest in India, where this type of payments may be the only mobile payment method actually available to consumers. • Boku developed the required technology and teamed up with mobile network operators (MNO) to enable mobile payments in India since July 2014. By opening India to direct carrier billing-based mobile payments, merchants all over the world have access to a market with 1.2 billion people. In addition, merchants based in India can leverage Boku’s connections with more than 250 MNOs around the world to sell their own goods and services online outside of India by using Boku technology. Mopay, a global billing solutions provider, entered the Indian market with an in-app billing solution in May 2014. Mopay launched the HTML5-for-mobile version of its direct carrier billing platform on all large Indian carriers. The company also revealed that, even if the carrier network is unavailable, mopay's solution will work if the device is connected to a WiFi network. • In September 2013, mobile operator billing Fortumo launched its mobile payment services in India. Fortumo’s direct carrier billing support is available to subscribers of Vodafone, Airtel, Idea and Tata Domoco.

6.2. Mobile Payments Initiatives Most recent developments in the mobile payments market in India include: • In September 2014, First Data partnered with Mahindra Comviva to provide mobile POS to merchants across India. This payment solution enables businesses, including small and medium enterprises and service professionals, to use their mobile phone as a point-of-sale (POS) device and drive transaction volumes by letting consumers use card-based payment instruments. The associated card reader connects to the smartphone via Bluetooth, is equipped with a LCD display and tactile response pin pad for pin entry. It accepts a variety of card payments, including all kinds of chip and magnetic stripe cards and is fully compliant with RBI, EMV and PCI standards. • Oxigen Services India, a provider of payment solutions, launched in India a social mobile wallet service dubbed Oxigen Wallet in August 2014. With the newly launched service, people are able to share money with their friends and family over their preferred social networks and messaging platforms like Facebook, WhatsApp, Google+ and Twitter. They could also use their wallet to recharge their mobile phones, pay bills and shop across a number of online merchants. By using the Oxigen Wallet service, which is currently available through Apple Store and Google Play Store and the web, users can send money to their friends and family without needing the receiver’s bank account details.

• UK-based financial services provider Barclays launched a mobile payment service between India and the UK in August 2014, which enables Barclays' customers and even non-Barclays customers to transfer money. Dubbed Barclays Pingit, this mobile payments service enables users in the UK to send money by using a mobile number to anyone in India. • In May 2014, Money-On-Mobile, the Indian-based mobile payments subsidiary of Calpian, was selected by the Unique Identification Authority of India (UIDAI) to support a mobile cash-out pilot using biometric authentication. Based on the UIDAI’s Aadhaar programme that provides citizens with unique biometric identification numbers (similar to social security numbers), the pilot programme’s objective is to establish a mobile pay-out system that authenticates the identities of parties involved in cash transfers. Money-on-Mobile is a prepaid Indian mobile payment service that allows customers to use their mobile phones for making payments and transferring funds from one phone to another via SMS. Money-On-Mobile is, according to sources from June 2014, offered through 193.379 retail locations throughout India, an increase of 8.961 stores, as compared to 184.418 stores in April 2014. Processed transaction volume for May 2014 was INR 938 million as compared to INR 847.4 million in April 2014. At current exchange rates, the May 2014 processed transaction volume is approximately USD 15.8 million. • In June 2014, payment services provider First Global Data signed a joint venture with online shopping company Telebuy Skyshop which is set to bring to the Indian market a new digital wallet payment technology and continue the expansion of mobile payment products and services in India. • Also, in June 2014, Ezetap Mobile Solutions made a couple of moves. One move was to acquire Clinknow, a provider of loyalty platform for retailers for an undisclosed amount. Clink analyses anonymous transaction data and builds predictive models based on past purchase factors, such as propensity to buy, location, lifetime value, etc. Its targeting platform, then, connects retailers with consumer segments that are most likely to buy their products and use their services. Another move was to partner with State Bank of India for the deployment of a mobile point-of-sale (mPOS) solution. The SBI-Ezetap platform is set to allow the bank to provide value- added services for merchants and consumers from a single, secure POS device and application.

Near Field Communication (NFC) payment-related initiatives continue to be nascent in India, targeting basic activities such as purchasing tickets for transportation or entertainment products.

• NEC India, one of the companies pushing NFC in the local market, did India’s first commercial deployment on an NFC payment solution in March 2013 with PVR Cinemas along with Blackberry. • In May 2013, Indian online fashion and lifestyle shopping portal Yebhi.com launched 30 virtual stores inside cafés across Delhi and Bangalore by using both NFC tags and QR codes. • In 2012, Nokia India was reportedly in talks with a majority of the metro rail projects in the country to introduce a NFC-based ticketing system for its consumers. According to mydigitalfc, Nokia partnered with the India-based mobile payments company Paymate for NFC solutions and tied up with banks for this service.

7. Payment Service Providers

• CCAvenue: a leading payment gateway service provider in India, founded in 2001. CCAvenue offers merchants

online payment acceptance covering several payment methods that includes acceptance of major credit/debit cards, ATM payments, net banking and cash cards. CCAvenue’s payment gateway provides several value- added features, such as support of up to 27 different currencies, Dynamic Routing, which enables merchant to route transactions when one gateway is down, Retry Option feature, that lets merchants or customers to re-submit failed transaction, One-Click Checkout (for repeat merchant customers) and built-in Marketing Tools.

• Citrus: an Indian payment service provider that was founded in 2011. Citrus is currently providing payment services to more than 500 merchants and has processed in excess of 2 million transactions per month in 2013. Citrus provides online payment acceptance to merchants through card payments, net banking, and cash on delivery. Citrus offers unique and value-added features, such as Express Checkout (faster checkout), Insta Buy (boost conversion rates by reducing pages to go through when purchasing), Intelligent Traffic Route (reroute transaction to different gateways) and Single Dashboard for Multiple Gateways.

• EBS: or E-Billing Solutions is an India-based payment service provider founded in 2005. In 2011, Ogone Payment Services acquired EBS and, in 2013, Ingenico acquired Ogone. EBS is the first Indian payment service provider to achieve PCI DSS Level 1 Standards compliance. EBS is a partner with several acquiring banks to provide merchants with online payment acceptance. EBS covers 97% of all payment methods available in India: credit/debit card, net-banking, e-wallets, cash card, EM, IVRS and Invoice payments. EBS also provides value- added services such as merchant support services.

• PayPal: a global payment service provider that allows businesses and end-users to accept and receive payments over the internet through different payment methods.

• PayU: an international payment gateway that is currently operating in 16 countries worldwide. PayU is owned by Naspers Group, a South Africa-based media and internet company. PayU provides merchants with online payment acceptance. Payment methods include acceptance of all major credit/debit card (VISA, MasterCard, American Express and Diners), locally issued Indian cards and Net Banking. PayU’s value added service include 24/7 fraud monitoring team and advanced fraud prevention filters.

• Payzippy: an online payment gateway service owned by Flipkart Payment Gateway Services Pvt. Ltd. of India. Payzippy lets merchant accept payments online (web or mobile) from their customer through the following payment method: card payments (VISA, MasterCard, Maestro and American Express) and net banking (banks supported are: HDFC, Axis, SBI, ICICI, Indus Ind, KOTAK and YES Bank).

7.1. Major Indian Acquirers The top acquiring banks in India are CitiBank India, Axis Bank, HDFC Bank Ltd, ICICI Merchant Service, State Bank of India, American Express Banking Corp.

Find out more at the most relevant PSPs, payment gateway services and processors in India here.

8. Ecommerce Fraud and Online Fraud Prevention in India

A huge market with rapid ecommerce growth, India poses challenges for businesses looking to expand internationally. There is evidence of consumer concerns about card fraud and the central bank is active in promoting measures designed to protect consumers from payment fraud. Merchants will need to demonstrate their active commitment to consumer protection while seeking to ensure that they enable sales to genuine customers.

8.1. Payment Fraud Profile According to Reserve Bank of India (RBI), with 350 million cards in use in 2012, payment fraud remained low, at USD 9.1 million. The most common types of reported fraud in India were skimming and online fraud.

More recent evidence suggests that India is a target for cyber-crime. In 2013, an international report identified India in a top three targets for cyber-attacks, accounting for 6.5% of targeted attacks during 2012.

In November 2014, RBI took the unusual step of warning consumers about frauds being carried out in the Reserve Bank’s name. Such attacks included the issue of fake RBI cards to gain consumer confidence and to encourage them to deposit funds with the fraudster, as well as attempts to obtain account details, via phone and the internet.

A January 2014 article questioned the security of chip and PIN transactions in India, claiming that a virus (‘Dexter’) had affected a number of POS machines and was stealing card data. In February 2014, there was a number of reported ATM frauds and police warned customers to protect their PINs.

Most recent research by Aite Group shows that 41% of Indian cardholders experienced fraud in the past five years (compared with 37% in the five years to 2012). Indeed, for prepaid cards, more people in India said they had experienced fraud (18%) than in any of the other sixteen countries surveyed.

Interestingly, the survey also found that, of the countries studied, Indian consumers had the highest levels of confidence in their financial institutions to protect them against fraud.

The central bank has been active in efforts to prevent payment fraud, including the adoption of PCI DSS by June 2013, and a move towards a real-time fraud monitoring system. RBI recognized ‘an increasing need to identify early warning signals to capture fraud close to their occurrence.’

Most of the large banks reported their readiness for migration to the use of PIN for debit card transactions at the point of sale by June 2013. In September 2013, RBI mandated a liability shift designed for the following issue where a cardholder uses a terminal that does not adhere to mandated standards and, instead, will be compensated for any loss, with the responsibility lying with the acquiring bank.

Though there are now large numbers of cards in circulation, RBI has recognised that only 5% of debit cardholders and 10% of credit cardholders use their cards abroad. In July 2013, in order to counter the potential fraudulent use of domestically-issued cards in other countries, RBI stipulated that all new debit and credit cards were to be issued only for domestic use, unless international use is specifically sought by the customer.

8.2. Ecommerce and Mobile Commerce Fraud Prevention Ecommerce continues to grow rapidly in India and is expected to reach USD 20 billion in 2015. The potential is enormous, driven both by an underserved consumer base and high levels of mobile usage. A young population (average age 26) and high levels of individuals exclusively accessing the internet via mobile devices has created a fertile environment for mobile commerce. It has been reported that mobile payments could soon account for up to 70% of online payments. Already, Amazon India has stated that 40% of its traffic comes from mobile devices. The most explosive growth of new internet users is in non-urban areas and many of these people will have accessed the internet for the first time using a mobile device.

To date, India does not appear to have suffered a great deal from CNP fraud. In October 2013, Sift Science placed India 22nd in a list of the 25 countries most subject to ecommerce fraud. One of the reasons for this may be India’s two-factor authentication mandates, requiring additional validation for online CNP transactions. RBI has also mandated online alerts to cardholders following CNP transactions above INR 5000 and banks have now extended this to all transactions, including card-present payments. As soon as an alert is received, customers are able to issue a ‘de-activation request’ for a transaction they have not performed.

In October 2014, The Times of India commented on a number of incidents of fake ecommerce merchants. It reported that, in order to curb fake online sale frauds, established payment gateways have launched detection mechanisms.

Online merchants looking to expand in this very large market need to focus on service excellence and knowledge of their customers. They need to be prepared for an increase in fraud over online and mobile channels and provide additional protection for channels where 3D Secure is not available. Indeed, where possible, the combination of 3D Secure authentication with other fraud prevention techniques, which can identify and enable genuine transactions that have failed 3DS authentication, can offer a powerful and effective weapon against fraudsters.

For more information on cross-border and domestic ecommerce fraud, mobile fraud, fraud prevention and the importance of tailored fraud rules, visit www.aciworldwide.com.

9. Sources and References

• Chapter 2, 3 and 4: Data and research provided by Payvision – www.payvision.com; CIA World Factbook, 2013 - https://www.cia.gov/library/publications/the-world-factbook/geos/in.html; The World Bank Data IBRD IDA, 2014 - http://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS; yStats - India B2C Ecommerce Market,

2014 and International Telecommunications Union (Geneva), 2013; Kantar World Panel, 2014; GSMA Intelligence - Infographic: Defining mobile penetration in India: population, subscribers and connections, 2013; Avendus - India's mobile Internet - The revolution has begun, 2013; Mary Meeker Internet Report, 2014 and India Retailing – M-commerce: Driving the Ecommerce Revolution in India, 2014; Internet & Mobile Association of India (IAMAI), 2014; PWC - Evolution of ecommerce in India, 2014; Accel Partners India - How is the E-Commerce industry in India shaping up, 2014; Forrester - India Online Retail Forecast, 2013 To 2018, 2014; Euromonitor International - Internet Retailing in India, 2014; Ethinos - Snapshot of Digital India - September 2014; BorderFree Index – India, 2013; Fortune.com, 2014; KPMG - Ecommerce Rhetoric, Reality and Opportunity, 2013; Shopify, 2014; Exim Bits - Cross-border ecommerce taking giant strides, 2014; Wikipedia - http://en.wikipedia.org/wiki/Languages_ of_India); Technopak, 2014; Financial Times, 2014; Snapdeal, 2014; Amazon, 2014; • Chapter 5, 6 and 7: Data and research provided by PAY.ON - www.payon.com; www.thepaypers.com; Euromonitor International – Credit Cards in India, 2014; DataMonitor Financial; http://www.ft.com/cms/s/0/ c3cdb920-b29d-11e3-8038-00144feabdc0.html#axzz3KM4z50tC; http://yourstory.com/2014/02/mswipe- matrix/; http://www.boku.com/boku-unlocks-india-mobile-payments/; http://www.mahindracomviva.com/ media/mahindra-comviva-and-first-data-empower-merchants-across-india-through-mpos-roll-out.htm; http:// indianexpress.com/article/technology/technology-others/obstacles-for-apple-pay-in-india-nfc-payments-hit-by- lack-readiness-of-stakeholders-says-nec/#sthash.Z5Lnkfi2.dpuf; https://www.ccavenue.com/ccavenue_index. jsp#feature-block2; http://www.citruspay.com/about-us.html; http://articles.economictimes.indiatimes.com/2011- 09-23/news/30193916_1_indian-market-signs-deal-online-payment; http://www.ingenico.com/en/media-centre/ press-releases/20130129-ingenico-announces-an-agreement-for-the-acquisition-of-ogone-leading-pan- european-online-payment-services-provider/; http://www.ebs.in/en/index.php/company/about-us; https://www. paypal.com/in/webapps/mpp/website-payments-standard; https://www.payu.in/aboutus; https://www.payzippy. com/merchants; Ogone - http://www.ogone.com/~/media/files/acquiring_partners_pm_eng1.ashx; • Chapter 8: ACI Worldwide - www.aciworldwide.com