Earlier, in 2019, the RBI had released guidelines on tokenisation for debit and credit card transactions to enhance the safety and security of the payment systems in the country. The RBI has recently decided to extend the deadline for card tokenisation to June 30, 2022.
Tokenisation of cards
Tokenization is the process of replacing the customer's account number with a unique alphanumeric token which can then be used for transactions. The token will act as the card at point of sale (POS) terminals, instead of the card’s details. The token allows payments to be processed without exposing actual account details. Hence, the online portals would not be allowed to store card details.
How tokenisation works?
- Before shopping online or booking tickets, customers enter card details and opt for tokenisation with the merchant (say, Amazon, Flipkart etc.)
- The merchant forwards it to the respective Bank and Card networks (VISA, Mastercard, RuPay etc.) and requests for token
- Token gets generated and is sent back to the merchant. Merchant would be allowed to save only the token and not the card details.
- Customer can complete the transaction using the CVV and OTP.
- Next time, the customer need not enter the card details. The Customer needs to select the saved token with the merchant to complete the transaction.
Note: One token is limited to just one card and one merchant (online portal). For instance, if you have, say, an ICICI credit card tokenized on Amazon, then, this token will be applicable only on Amazon. You would have to generate different token for the same card on Flipkart.
Benefits of tokenisation
- Tokenisation provides added layer of security and convenience for the customers.
- It eliminates the need to enter the account number multiple times when shopping on a smartphone or tablet.
- Less risk in storing tokens online. Even if it is hacked, it would not be possible for the fraudsters to decrypt the account details.