Debit, credit card tokenization: The Reserve Bank of India or RBI, being the central bank of the country, is responsible for protecting the security of all Indian citizens who carry out banking transactions. In a bid to protect customer security, the RBI issued tokenization guidelines last year prohibiting merchants from effectively storing customer card data on their servers. The central bank has mandated the adoption of card-on-file (CoF) tokenization applicable to domestic online purchases. The deadline for nationwide adoption of card tokenization has been extended by six months, from January 1 to July 1, 2022, to ensure a smooth transition from the current situation.

What is Debit Card, Credit Card Tokenization?

Under the new rule, online merchants cannot store your card data, but only your bank and card provider will be able to access it. Under this, a cardholder can get the tokenized card by initiating a request on the application provided by the token requester. The token requester will forward the request to the card network which, with the agreement of the card issuer, will issue a token corresponding to the combination of card, token requester and device.

This means that when you start purchasing an item from a merchant, the merchant will initiate tokenization. It will ask for your consent to tokenize your card. Once you have given your consent, the merchant will send a tokenization request to the card network. The card network will then create a token, which will proxy your 16-digit card number, and send it back to the merchant. The merchant will keep this token for future transactions. You will also need to enter your CVV and OTP as before to approve the transaction. If you wish to use another card, the same process must be followed again.

However, this process is not mandatory and a customer can choose whether or not to leave their card tokenized. In this case, the customer will have to re-enter all the card details when making any online purchase.

RBI Card Tokenization: A Timeline

Earlier, the RBI said that the new card tokenization rule would be applicable from 1 January 2022. However, after receiving inquiries from merchants, it extended the date by six months, stating that it would come into effect at from July 1. CoF) data is extended six months to June 30, 2022; post this, that data will be purged,” he said.

Following this, payment merchants started sending notifications to customers about card tokenization as the deadline approached. At a press conference after announcing his meeting with the MPC in June, RBI Deputy Governor T Rabi Sankar said the country’s payment ecosystem was ready to implement the decision. .

“With the coming weeks to meet the tokenization deadline, progress has been good. About 16 crore tokens have already been created, this will pick up closer to the deadline. all stakeholders to ensure that the tokenization process goes smoothly,” Rabi Sankar told a press conference after the decision of the RBI MPC meeting was announced on Wednesday.

“I really don’t think there’s any need to speculate on whether or not the deadline will be extended. There are a few collateral issues that have been brought to our attention, which we will address as we go along. This are new problems that arise every time you change your regime,” Rabi Sankar told reporters.

What will happen from July 1?

After June 30, i.e. from July 1, credit and debit card data available from payment merchants will be purged, the RBI said. This means that customers will have to re-enter their card details each time they want to buy something online, if they have not consented to card tokenization. If a customer agrees to proceed with the tokenization of the card, on the other hand, they will have to do so explicitly and enter only the CVV and OTP details during the transaction.

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