Implementation of Card Tokenization

The tokenization of card-based payments will be implemented from October 1, 2022.

Key facts

  • The Reserve Bank of India has announced that it will not extend the October 1 deadline for the implementation of the card tokenization.
  • The deadline has been extended twice previously.
  • Around 35 crore tokens have already been created and in September, about 40 per cent of transactions were undertaken using tokens, at a total value of Rs.63 crores.
  • The RBI required all merchants to delete the customer debit and credit card details before October 1 and replace the card payments with unique tokens.
  • It mandates masking all sensitive details like 16-digit card numbers, names, expiry dates, and codes with a unique card number called token.
  • This rule is applicable to all stakeholders except card issuers and card networks.
  • Under these rules, the central bank has permitted authorized card payment networks to offer card tokenization services to consumers requesting it.
  • After December 31, 2022, it will be impossible to store card details, except by card networks and card issuers.

What is tokenization?

Tokenization is the process of replacing card details with a unique code or token, allowing the individuals to purchase online without exposing sensitive card details. Token is a randomly generated unique placeholder obtained from the company’s internal network. It is used to access, retrieve and maintain a customer’s credit and debit card details. It is used when recurring payments are made or when merchants store card information to speed up checkouts. It ensures improved safety and security of card transactions. Often times, debit and credit card information are exposed on merchant website during hacking incidents. Card tokenization will help address this issue. It allows customers to save digital copy of their cards on their smartphones. Therefore, they need not carry a physical card for payments. It will improve customers’ payment experience and helps in higher transaction approval rates for merchants.

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