No Need To Enter Credit/Debit Card Number For Online Transactions From July 1st: Card Tokenization Is Here

Debit, Credit Card Tokenization: The Reserve Bank of India or the RBI, being the central bank of the country, has the duty of protecting the security of all the Indian citizens who conduct bank transactions. With the nobel goal of protecting the security of Indians, the RBI in 2021 published debit card and credit card tokenization rules and guidelines under which merchants were forbidden from saving the customers’ card data on their servers. The central bank made it mandatory to adopt card-on-file (CoF) tokenization applicable to online purchases made within India. The deadline for the India-wide adoption of card tokenization was increased by six months from 1st January to 1st July 2022, to guarantee an easy shift from the current transaction methods.

What is Debit Card, Credit Card Tokenization?

Under the new rule, online merchants are prohibited from storing a customer’s card data and only the customer’s bank and card provider will have access to it. A cardholder can now get the card tokenized by putting a request on the app given by the token requestor. The token requestor will send the request to the card network after which, the card network with the permission of the card issuer will issue a token corresponding with the card, the token requestor, and the device.

This means that when a customer purchases an item with a merchant, the merchant will start the process of tokenization. “It will ask for a customer’s consent to tokenize their card. Once a customer gives their consent, the merchant will send a tokenization request to the card network. The card network will then create a token, which will act as a substitute to a customer’s 16-digit card number, and send it back to the merchant. The merchant will then save this token for future transactions. The customer will also have to enter their CVV and OTP just like before to approve any online transaction. If a customer wants to use another card, the same process is going to be repeated again.

RBI Card Tokenization: A Timeline

Previously, the RBI had said that the new card tokenization rule will be applicable from 1st January 2022, onwards. But, after getting many requests from merchants, the bank increased the date by six months, and the rule will now come into effect from 1st July. “In light of various representations received in this regard, we advise…the timeline for storing of a card on file (CoF) data is extended by six months till June 30, 2022; post this, such data shall be purged,” the bank stated.

The payment merchants have started sending notifications to customers regarding card tokenization as the deadline approaches. In a press conference after its June MPC meeting announcement, RBI deputy governor T Rabi Sankar said that the country’s payment ecosystem was ready to implement the move.