Credit Card Payments as a Security Measure for Ride-Share Apps

Credit Card Payments as a Security Measure for Ride-Share Apps

 

Ride-share drivers and operators face fewer security risks when accepting passengers who settle payments using credit cards.

 

Grab drivers and passengers have had cause to be worried about recent news items about two Grab drivers who have apparently gone missing along with the vehicles they were operating. Reports indicate that police investigators have linked the two Grab drivers to a common passenger seen driving one of the missing vehicles. The suspect remains at large, while the identification seized from him during a traffic violation stop appears to be counterfeit. In response to these developments, Grab Philippines has announced it would be deactivating 350,000 passenger accounts and would be requiring passengers to under mandatory passenger verification.

 

The particulars, and the efficacy of these new measures remains to be seen. It should be pointed out though that Grab passengers who pay their fares through credit cards and not cash pose less of a security risk to drivers.

 

The process required for issuing credit cards in the Philippines has built into it a mandatory identity verification process that other merchants (such as Grab) can take advantage of. Under the Philippine Credit Card Industry Regulation Law (Republic Act No. 10870) and its Implementing Rules, credit card issuers (whether they be banks or non-banks) are required to conduct know-your-client (“KYC”) and customer identification procedures, consistent with applicable regulations.” These KYC procedures include:

 

• Requiring clients to produce official documents to prove their true identity, such as passports, social security cards, identification cards, and driving license,
• Maintaining a system of verifying a true identity of the client as well as the authority and identification of all persons purporting to act under their behalf.
• Prohibiting anonymous accounts, accounts under fictitious names, and all other similar accounts.

 

At present, Grab Philippine users may use a credit card as a mode of payment by adding their card to GrabPay. Only cards with an EMV Chip, an expiry date, and a CVV can be added — such measures help ensure that only validly-issued credit cards can be enrolled, cards where the issuer already had the opportunity to conduct a KYC identity verification process.

 

Some ride-share drivers may prefer to receive payments in cash, as such payments could be more easily and readily spent. However, there are unavoidable security risks associated with ride-share passengers who insist on paying with cash alone. Such riders, if acting with evil intent, can easily employ such rudimentary schemes as using a fake user photo or ID in order to disguise their identity. User verification would potentially occur at the level of the driver, who unlike credit card issuers, would be ill-equipped to conduct proper verification. Indeed, ride-share drivers who entirely rely on riders who pay via credit card certainly face less security risks.

 

Similar security risks are associated with electronic commerce in general, and not just with the ride-sharing economy. Electronic merchants who accommodate such payment means as cash-on-delivery (as opposed to credit card payments) are less assured of payment and would be deprived of remedies against fraudulent buyers whose identities could not be ascertained. Again, because of the KYC policies that precede the issuance of credit cards, electronic merchants are more secure in the means of payment and in the identity of their customers if they are transacting with users who have their own verified credit cards.

 

Credit card usage in the Philippines remains quite low. According to the 2017 World Bank Global Findex, only 1.9% of Filipino adults have a credit card. Not enough Filipinos perhaps possess sufficiently good credit standing or financial capability to own a credit card. However, the same World Bank Global Findex report cites a considerably higher percentage of Filipino adults with a debit card (21%) or who have made or received digital payments (25.1%). Users of bank-issued debit cards, which may also be linked to a Grab account, have also undergone the requisite KYC identity verification before they were issued a debit card or an ATM card.

 

As Philippine consumers increasingly rely on electronic commerce, merchants should be mindful of the reduction of risks when transacting with customers who have been included in the financial system by virtue of having their own accounts with a bank or credit card company. This increased consciousness may help accelerate efforts of the Philippine government and of financial institutions towards greater financial inclusion.