RBI’s New Tokenisation Policy Explained


The Reserve Bank of India (RBI)’s card-on-file (CoF) tokenization guidelines went into force on October 1 with the intention of providing safe and secure card transactions. Any platform conducting financial transactions, including mobile apps, merchants, payment aggregators, and payment gateways, will no longer be permitted to keep clients’ critical credit and debit card information, such as the three-digit CVV number, expiration date, and all.

After numerous extensions, the new credit and debit card regulations have become effective. Extensions were given to the system, according to the RBI’s deputy governor, to allow for a smooth transition.

Since the real card information is concealed by tokens and not disclosed to the merchant during the transaction, it is thought that tokenized card transactions are safer.

In accordance with the new regulation, these companies will combine real card information with a special backup code called a ‘token’. According to RBI, each of these tokens will be specific to a certain card, token requester, and device. About 35 crore tokens have already been generated, according to recent information from the RBI. According to the Deputy Governor of the RBI, T Rabi Shankar, tokens were used in about 40% of transactions alone in September.

A debit or credit card user must first submit a request on the app that the token requester provides in order to choose tokenization. The card network will then receive the request from the token requester, who will then, with the card issuer’s approval, issue a token matching the combination of the card, the token requester, and the device.

Even in online transactions, a unique token will be saved on the server in place of the card information.

When a consumer chooses to use tokenization, the merchant or transaction platform sends a message to Visa, Mastercard, or any other such payment gateway, which asks for a token associated with that card number and sends it to the bank to start the transaction.

Notably, there will be no tokenization service fees for clients.

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