RBI New Guidelines: What is Tokenisation? Importance and steps to tokenise credit & debit cards

RBI New Guidelines: The advent of the cashless mode of payments brought the dire need of security for all sorts of transactions. The Reserve Bank Of India (RBI), also extended the deadline to tokenise the debit and credit card till June 30. Tokenisation here means replacement of credit and debit card data used in online, point-of-sale, and in-app transactions with unique token numbers. 

According to RBI experts, this latest initiative will enhance the experience for cardholders by making all the transactions under lock and key. After tokenisation, all the card details of the customer will be stored as an ‘encrypted’ token to avoid any kind of meddling.

What is Tokenisation ?

Tokenization, in terms of banking, is a process of substituting a sensitive data element with a non-sensitive equivalent, referred to as a token. And for better understanding of users, Reserve Bank Of India defines tokenisation as 'the replacement of actual card details with an alternate code referred as 'token', which is usually unique for a combination of card, token requestor and device'.

Here, the 'requestor' accepts a request from the customer to tokenise their card, and then passes it on to the card network to issue a corresponding token for further use.

Why is Tokenisation important ?

Tokenisation provides an additional layer of security by encrypting the card details and will help enhance consumer confidence in using digital modes of payments.

Under Tokenisation services, requestor provides a unique alternate code as a substitute for the 16 digit customer card number. On a simpler note this means that a customer's card details will no longer be available on any Merchant, Payment Gateway, or 3rd party for transactions.

Putting a mask over bank cards provides an additional layer of security by encrypting card details. Also, this creates a shield against unauthorized usage, enhancing consumer confidence.

Steps to generate the tokens

The card tokenisation process is simple and hassle-free. Any cardholders get tokens for their card while making payments through all the top e-commerce or food delivery apps.Otherwise, skim through the steps mentioned below to get your card covered:

Step 1: Initiate transaction with any preferred merchant’s website or app.

Step 2: At checkout, enter your bank details accurately.

Step 3: Now pick from “Save your card details” or ‘Save card as per RBI guidelines”

Step 4: Generate OTP after entering all the required details to continue the tokenisation process.

Step 5: Verify and receive a token for all your further transactions.

This RBI mandate would come into effect from 1st October 2022. Also, it is assured that this will not hamper users credit card experience but will only make credit & debit card transactions more secure.