Question 29 from UPSC CSE 2018 - Current Affairs

Question

With reference to digital payments, consider the following statements:
1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account.
2. While a chip-pin debit card has four factors authentication, BHIM app has only two factors of authentication.
Which of the statements given above is/are correct?

IASCODEX · Accepted Answer

Correct Option: A. 1 only

Strategy: The strategy focuses on two key evaluations:
-   **Statement 1:** Assess basic knowledge of UPI and BHIM interoperability, confirming that all UPI-enabled bank accounts can send and receive money via BHIM.
-   **Statement 2:** Identify the exaggerated claim that chip-PIN debit cards use four-factor authentication. Compare this with BHIM's multi-factor authentication, which involves device, account, and UPI PIN, to quickly dismiss the overstatement.

Key Info: ## BHIM (Bharat Interface for Money)
BHIM is a mobile payment application developed by the National Payments Corporation of India (NPCI) based on the Unified Payments Interface (UPI). It facilitates instant money transfers using a beneficiary's UPI ID, mobile number, or QR code. The app is interoperable across all UPI-participating banks, enabling payments to any UPI-enabled account without requiring IFSC codes or bank account numbers, emphasizing simplicity.

### BHIM Authentication
Authentication in the BHIM app generally involves three factors:
-   **Device Binding:** The app links to a specific phone and SIM card combination.
-   **Account Registration:** The user's bank account is registered using information from the mobile number linked to the bank.
-   **Transaction Authentication:** Transactions are secured by the user-defined UPI PIN.
These factors combine 'something users have' (device/SIM) with 'something they know' (PIN) to enhance security.

### Chip-PIN Debit Card Authentication
Chip-PIN debit cards, operating under EMV (Europay-Mastercard-Visa) standards, authenticate transactions using the physical chip on the card and a 4- or 6-digit PIN. This is typically considered two-factor authentication, based on:
-   **Possession of Card:** (Something you have)
-   **PIN:** (Something you know)

### Regulatory Oversight
NPCI serves as the central body for retail payment systems in India, overseeing UPI, IMPS, RuPay, and related technologies. Both BHIM and chip-PIN debit card systems adhere to regulatory guidelines from the Reserve Bank of India (RBI), designed to ensure financial security. It is crucial to accurately distinguish the number of authentication factors based on the specific technology and its practical deployment.

IASCODEX · Answer

Option B: 2 only

IASCODEX · Answer

Option C: Both 1 and 2

IASCODEX · Answer

Option D: Neither 1 nor 2