Reserve Bank of India says that after the change in the tokenization system, the payment experience of cardholders will improve and debit card and credit card ( Credit Card and Debit Card) transactions will become more secure than before.
According to RBI, the purpose of these new rules is to make payment through credit and debit cards more secure than before.
When the customer transacts online, at point of sale (POS) or on the app, all the details will be saved in the encrypted code.
What is this tokenization system
Under the new arrangement, the Reserve Bank has prohibited payment companies from storing the data of customers’ credit cards or debit cards.
Payment companies will now have to provide an alternate code in lieu of the card, which is named Token. These tokens will be unique and the same token will work for multiple cards. After this is implemented, instead of using the card directly for online payment, a unique token will have to be used.
According to this new rule of RBI, without taking approval from the customer, his credit limit cannot be increased. Also if no payment has been made then charges or taxes etc. cannot be capitalized while adding interest.
Token system will reduce fraud cases: RBI
RBI says that with the implementation of the system of payment with tokens in lieu of cards, the cases of fraud will be reduced. Right now, the risk of fraud with customers increases due to 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 the card details after the customers make payment with debit card and credit card.
In many cases, merchants are left with no option but to store the card details before the customers. If these details are leaked, there is a possibility of loss to the customers. According to the Reserve Bank, these dangers will be reduced with the new rule.
Will not be able to give information to co-brands
In the new provisions of RBI, it has been said that the information related to the transactions done through the card cannot be given to the branding partner. These provisions may affect the business model of companies operating in the co-branded card segment, as these companies entice customers with various offers based on these transactions.
These companies did not get relief
Meanwhile, RBI has not given any relief in implementing the rules which are going to affect fintech companies. Apart from this, some of these provisions are for co-branded cards, including Slice, Uni, OneCard, LazyPay (Fi), PayU’s, Jupiter etc.
Deadline has been extended twice
The RBI had extended the deadline for storing card-on-file data from December 31, 2021 to June 30, 2022, taking into account the suggestions received from various stakeholders. Later it was again extended till 30 September.
Now the Reserve Bank is not considering to extend this deadline further. This means that now the payment companies will have to delete the credit card and debit card data of the people after 30 September 2022.
