Bank Card Tokenisation: Know RBI’s new rules on Debit Card, Credit Card

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The Reserve Bank of India (RBI) will implement card tokenization very soon in India. The card tokenization system is set to start from October 1, 2022. Under this system all the credit and debit card information required during an online transaction will be replaced with independent tokens. The actual card details will be replaced with an alternate code called ‘token’ during a transaction.

What is Card Tokenization?

Under the card tokenization process, the Credit/ Debit card details are replaced with a token. In simple words the card details like 16-digit number, names, expiry dates, and codes are replaced by a token. The token is used by the merchant’s website for the transaction.

Reason for tokenizing cards

RBI is set to implement the tokenization system of bank cards in order to secure the card details of customers. Currently, the bank card details are saved by a merchant during a transaction. If, the merchant’s website is hacked, the details of the customers will be exposed. After the tokenization system is implemented, the information about the customer will be with the bank and not with the merchant.

How does the tokenization system work?

  • A customer has to visit the merchant’s website and select preferred card options for payment.
  • Then the customer has to enter all details. If the website wants the user to store card details for faster checkout, the user will get an option ‘secure your card as per RBI guidelines’. The user has to accept the option to generate a token under RBI guidelines.
  • The user then receives a one-time password (OTP) on his/her smartphone or email. The OTP has to be entered on the bank page. Then the card details are sent for token generation.
  • The token that is generated is sent to the merchant. The token is stored by the merchant against the identification data of the customer.
  • Every time the user chooses to make a transaction on a merchant website, a new token is generated.
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