RBI Tokenization Explained What is tokenization and why has the RBI issued new guidelines?

RBI Tokenization: Recently, RBI policy is making headlines regarding extension of tokenization duration for all debit cards and credit cards for about 3 months to evade bad faith feature and kill chain and to facilitate easy and seamless access to all interested cardholders. The new RBI policy says that no other third party or entity can store the COF (CARD ON FILE) except the main card issuer and card networks in payments and transactions. The reason behind the proposed new deadline is nothing more than to satisfy the request or demand of other traffickers and industries who have approached the Reserve Bank of India to amend new guidelines.

Since we couldn’t travel abroad, we became dependent on online services since the Corona era and payments have increased significantly. Today, most consumers use debit and credit cards, and fraud cases have increased along with the growth of online payments. RBI has requested that all credit and debit card data be merged online, via POS and in-app transactions to create a single token to prevent such fraud.

RBI Tokenization

For starters, tokenization involves saving your card details (debit or credit), such as a 16-digit number, name, expiration date, and code. A token will be used to replace them. For the transaction, your merchant’s website uses the token. The credit card information you submit each time you place an online order is immediately accessible to the public, including your card number and name.

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The transaction ends once you enter CVV, then OTP, and after that, it will no longer work. The Reserve Bank has asked all companies, including Swiggy, Amazon, Myntra, Flipkart and Zomato, to destroy all consumer data, such as card number, CVV code or expiry date, from 1 October 2023.

RBI Tokenization 2023 Full Information

RULES ABOUT THE NEW RBI POLICY YOU NEED TO KNOW

  • RBI encourages its customers to tokenize their cards to facilitate convenient transactions and safeguard their card details.
  • The central bank also ordered payment institutions and online distributors not to access any confidential data of cardholders.
  • Under the issued rules, consumers are required to create specific codes or substitute tokens instead of exposing actual card information.
  • This policy comes into effect on October 1, 2023.

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Benefits of RBI Card Tokenization

To protect customer card information, the Reserve Bank of India has implemented these standards. During a single transaction, the merchant now saves the bank card information. Customer data is also not safe in such a case if the merchant’s website has been hacked. The data of all customers will be in the bank, not on the merchant’s website, thanks to the tokenization of the card. Every time you use your card you will save yourself the effort of entering your data. Since the token number will remain with the merchant, it will serve as a private code for your card in a way. Banks around the world are now protecting credit card data after cyber fraud. As a result, the risk of card data theft is reduced by exchanging your token at each merchant or e-commerce portal.

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RBI Tokenization Explained

Dealers cannot access cardholders’ card data under this system, and must apply for the registered card using tokenized data as a substitute. To access electronic payments or online transactions, customers or cardholders can now get more detailed information about the cards.

As a result, TOKENIZATION means replacement of actual card data with other information in encrypted format, which is expressed as TOKEN, as per the new idea proposed by RBI. This allows users to execute card transactions without having to contact them by using specific tokens. The cardholder must store their own MasterCard or Visa transaction data at CARD-ON-FILE (COF) companies. The stored MasterCard or Visa account will be paid by the same dealer, depending on the card owner.

IMPACT OF THE NEW RULES

After the announcement of the new rules, the privacy of the customers was ensured by not disclosing any data or information to any entity or any merchant during the transaction period process. Furthermore, it will also not store customer data on the e-commerce platform that could be used for fraud in the future. The encrypted folded token helps preserve your natural information.

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Guideline for generating tokens for RBI tokenization

The Reserve Bank of India (RBI) will implement its registered card tokenization norms from next month, i.e. October 1, 2023, in view of complaints related to misuse of debit cards or credit. This is being implemented in view of the increasing incidents of misuse of debit or credit cards.

  • When you visit an e-commerce website or any application to make a payment, you will need to fill in the details of the card from which you need to make the payment.
  • Then you have to secure the card. For this, to tokenize your card as per the RBI instructions, you need to select the option “RBI Guidelines to protect your card”.
  • After that you must press the Accept creation option. To complete this process, OTP will come on your phone and in the email linked to the bank, which you will have to enter again.
  • Then your token will be created. In this the data of your card will be saved in a token.
  • The next time you make an e-commerce or app payment again, only the last four digits of your card number will be visible to identify your card.
  • Thus, in this way, the data of your card will be saved in the form of a token and will also be safe. With this you can make payments easily.
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