Is online credit-card shopping in Pakistan truly risky, or is the fear mainly due to perception and lack of awareness?
Payments
Asked by Question Bot03/Jul/20151 answer
1 Answer
F
Faisal Khan
Answered 03/Jul/2015
There is inherently nothing "scary" about using a credit card online. There are various theories over the years that one can read as to why credit card and/or debit card transactions online, are limited. This, by the way is true across South Asia.
First and foremost, it is education. Many credit/debit card holders have no idea about the rights they have/do-not-have about CNP (Card Not Present) transactions and/or MOTO (Mail Order/Telephone Order) transactions.
This is equally stressed by the front line customer support at banks, who also have limited or periphery knowledge on slightly complex questions. For example if you were to call your credit card bank in Pakistan and ask why the AVS (Address Verification System) is not working for Pakistani cards abroad, they would be hard pressed for an answer.
Equally, you can ask them literally 100s of other questions and the answers are not easily forthcoming. What is the guaranteed cycle (days) upon which a chargeback can be filed? What is Interchange fees I would be charged if I used my credit card for cash advance? If I would like to dispute an international charge (the charge was made, but the merchant says it was not made), what is the procedure? If you want the transaction number for the charge you made good luck in getting that, most CS reps don't even have access to such basic data, If an erroneous charge occurs, its removal is 15 days minimum - Why if ask? then answers will be limited (at best), etc.
The second issue is the number of merchants in Pakistan or otherwise who are willing to accept credit cards from Pakistan. UBL's Wiz (Pre-paid Debit Card) for example, won't run on Apple (mixed results), Amazon, GoDaddy, Etsy, AWS, Rackspace, Barnes & Noble, and many other stores.
The same problem exists with Credit Cards. Most do not give an issue, but then again, fraudulent usage and/or abuse of the credit card is very common in Pakistan.
We (as the end-users) just do not have the confidence in the credit/debit card systems in Pakistan. We see too much pain and effort in trying to have issues resolved when it comes to banks.
On the risk and fraud management side, banks are so overly stringent, that for many transactions, you have to answer CBC (Call-Back-Confirmation) calls, and at times have to have your credit/debit card activated for an online transaction.
Most banks in Pakistan have a limit as to how much you can charge with a merchant in any given month. For example Standard Chartered Bank says, with a single merchant in any 15 days period, you cannot charge more than US$ 1,500 to that merchant's account.
All these risk/fraud rule-sets irks a few and for most across the board, it reduces the bank's exposure to fraud. Fair you say? Yes, say the bank. No says a person like myself who uses their card extensively online.
Then there is the issue of interest. Not online Interest as a form of additional charge the merchant must bear (which merchants love to pass on to consumers), but also the issue of Riba based transactions. With more and more people opting for Islamic banking and/or transactions without interest, credit cards are all the evil for them, cash on delivery makes sense even to a layman.
COD vs Credit Card transactions (for Pakistani market), has advantages for the merchant. The merchant gets paid there and then on COD method. With the credit card (acquiring) model, the payout can be as little as 2 days to as high as 15 days (depending on the risk of the merchant).
Online shopping can be made very secure, safe and easy to use with products like Verified by Visa or Secure by Mastercard. Even the evolution of one-time virtual cards (VCT - Virtual Card Technology) which essentially gives you disposable pre-paid numbers is also catching up fast.
Customers want absolute safety of using their credit card online. Banks was absolute safety of mitigating fraud/risk that they are underwriting, and merchants want a hassle-free system of getting paid. The balance of all three variables is not easy.
Until and unless there is mass adoption of plastic instruments for online payments, these issues will exist. The total number of merchants online in Pakistan is dismal (about 650 or so +/- 25 merchants). When we have say, 10,000+ merchants online, you will see online payments will be synonymous with say mobile top-ups and scratch cards. Its just a matter of time.
First and foremost, it is education. Many credit/debit card holders have no idea about the rights they have/do-not-have about CNP (Card Not Present) transactions and/or MOTO (Mail Order/Telephone Order) transactions.
This is equally stressed by the front line customer support at banks, who also have limited or periphery knowledge on slightly complex questions. For example if you were to call your credit card bank in Pakistan and ask why the AVS (Address Verification System) is not working for Pakistani cards abroad, they would be hard pressed for an answer.
Equally, you can ask them literally 100s of other questions and the answers are not easily forthcoming. What is the guaranteed cycle (days) upon which a chargeback can be filed? What is Interchange fees I would be charged if I used my credit card for cash advance? If I would like to dispute an international charge (the charge was made, but the merchant says it was not made), what is the procedure? If you want the transaction number for the charge you made good luck in getting that, most CS reps don't even have access to such basic data, If an erroneous charge occurs, its removal is 15 days minimum - Why if ask? then answers will be limited (at best), etc.
The second issue is the number of merchants in Pakistan or otherwise who are willing to accept credit cards from Pakistan. UBL's Wiz (Pre-paid Debit Card) for example, won't run on Apple (mixed results), Amazon, GoDaddy, Etsy, AWS, Rackspace, Barnes & Noble, and many other stores.
The same problem exists with Credit Cards. Most do not give an issue, but then again, fraudulent usage and/or abuse of the credit card is very common in Pakistan.
We (as the end-users) just do not have the confidence in the credit/debit card systems in Pakistan. We see too much pain and effort in trying to have issues resolved when it comes to banks.
On the risk and fraud management side, banks are so overly stringent, that for many transactions, you have to answer CBC (Call-Back-Confirmation) calls, and at times have to have your credit/debit card activated for an online transaction.
Most banks in Pakistan have a limit as to how much you can charge with a merchant in any given month. For example Standard Chartered Bank says, with a single merchant in any 15 days period, you cannot charge more than US$ 1,500 to that merchant's account.
All these risk/fraud rule-sets irks a few and for most across the board, it reduces the bank's exposure to fraud. Fair you say? Yes, say the bank. No says a person like myself who uses their card extensively online.
Then there is the issue of interest. Not online Interest as a form of additional charge the merchant must bear (which merchants love to pass on to consumers), but also the issue of Riba based transactions. With more and more people opting for Islamic banking and/or transactions without interest, credit cards are all the evil for them, cash on delivery makes sense even to a layman.
COD vs Credit Card transactions (for Pakistani market), has advantages for the merchant. The merchant gets paid there and then on COD method. With the credit card (acquiring) model, the payout can be as little as 2 days to as high as 15 days (depending on the risk of the merchant).
Online shopping can be made very secure, safe and easy to use with products like Verified by Visa or Secure by Mastercard. Even the evolution of one-time virtual cards (VCT - Virtual Card Technology) which essentially gives you disposable pre-paid numbers is also catching up fast.
Customers want absolute safety of using their credit card online. Banks was absolute safety of mitigating fraud/risk that they are underwriting, and merchants want a hassle-free system of getting paid. The balance of all three variables is not easy.
Until and unless there is mass adoption of plastic instruments for online payments, these issues will exist. The total number of merchants online in Pakistan is dismal (about 650 or so +/- 25 merchants). When we have say, 10,000+ merchants online, you will see online payments will be synonymous with say mobile top-ups and scratch cards. Its just a matter of time.