For those using credit cards and debit cards, some rules are going to change from next month. The Card-on-File Tokenization (COF Card Tokenization) Rules of the Reserve Bank of India are going to come into effect from October 01.
The Reserve Bank of India (RBI Tokenisation) says that after the implementation of the tokenization system, the payment experience of cardholders will improve, and debit card and credit card transactions will become more secure than before.
RBI extended the deadline twice
After the implementation of the new rules, whenever customers make a credit card and debit card payment at point-of-sale machines, online, or in the app, their card details will be stored as an encrypted token. Earlier this rule was to be applicable from January 01. Taking into account the suggestions received from various stakeholders, RBI extended the deadline for the collection of cord-on-file data from December 31, 2021, to June 30, 2022.
Later it was again extended till 30 September. Now the Reserve Bank is not considering extending this deadline further. That is, now the payment companies will have to delete the credit card and debit card data of the people after 30 September 2022.
Tokens worth crores have been issued by traders so far.
According to a report by news agency PTI, most of the big traders have already adopted the new token rules of the Reserve Bank of India. The report quoted sources as saying that so far 195 crore tokens have been issued to customers instead of debit cards and credit cards. Many digital payment companies were demanding the Reserve Bank increase this deadline.
The companies argued that they have not received it yet. Implementation of the new system in such a short time can affect the business. The companies were saying that there were still several operational problems in implementing this change. Now that most companies have implemented it, there is little hope of extending the deadline further.
What is tokenization?
Under the new arrangement, the Reserve Bank has barred payment companies from storing customer credit card or debit card data. Payment companies will now have to provide an alternative code, called a token, instead of a card. These tokens will be unique and the same token will work for multiple cards. Once this is implemented, instead of using the card directly, payment will have to be made online using a unique token.
Token system will reduce fraud cases
The Reserve Bank of India believes that the introduction of a token payment system in place of cards will reduce the cases of fraud. The risk of fraud with customers has now increased due to the leaking of credit card or debit card information.
The new system is expected to reduce such cases of fraud. The Reserve Bank says that at present, e-commerce websites, merchant stores, and apps, etc. store card details after making payments through debit cards and credit cards.
In many cases, merchants are left with no option but to store the card details in front of the customers. The leaking of these details leaves customers apprehensive. The new rules of the Reserve Bank will reduce these dangers.
