RBI Guidelines on Card Tokenization

RBI released new guidelines in September 2021 giving businesses until the end of the year to comply with regulations and giving them the option to tokenize. The RBI has ordered all Indian businesses to purge stored credit and debit card data from their systems as of January 1, 2022.

Card tokenization

Tokenization is a process by which card details are replaced with a unique code or token, generated by an algorithm, allowing online purchases to be made without exposing card details, with the aim of improving the data security.

What should debit and credit cardholders do from January 1, 2022?

• You start a purchase from a merchant.
• The merchant initiates the tokenization by asking for your consent to tokenize the card.
• Once you have given your consent, it sends a tokenization request to the card network.
• The card network creates a token as a proxy of the card number and sends it back to the merchant.
• To make a payment to another merchant or from another card, the tokenization has to be redone.
• The merchant saves the token for subsequent transactions.
• You approve transactions with CVV and OTP

Why Are Traders and Bankers Worried?

Merchants and bankers say they haven’t had enough time to comply with the changes, while opting out of tokenization would mean a customer would have to manually enter their card details every time they make a transaction. shopping online, which could discourage some customers, Reuters reported.

“Not all banks will be ready by January and even if they are, it’s likely that to avoid the inconvenience, customers can opt for one-step cash on delivery, instead of entering details,” Reuters said citing a banker with a major Indian lender, who asked not to be named.

“So not only will card transactions decrease, but cash in circulation will also increase, which is another concern. “