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RBI Tokenisation

RBI Tokenisation

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  • GS3 || Economy || Banking & Financial Sector || RBI

 Why in news?

  • The Reserve Bank of India has allowed tokenization of debit, credit and prepaid card transactions to enhance the safety of the digital payments ecosystem in the country.

 Details

  • The bank has offered permission for the process using all types of payment services and methods, including near-field communication (NFC), magnetic secure transmission (MST), in-app payment methods and cloud services.
  • This token will be sent to the Payment Processor of card networks and it is the only readable link in the whole system.
  • Once it is sent to the Payment Processor, it will be de-tokenized and the payment will be made to the merchant.
  • These tokens have high-security features. Once the token is issued, nobody can reverse the token to find the original card number other than the cardholder himself.

Why RBI do this ?

  • To avoid Data Deft of users from Service providers, RBI has introduced Tokenization
  • The Reserve Bank of India has allowed tokenization of debit, credit and prepaid card transactions to enhance the safety of the digital payments ecosystem in the country.

Significance of this move

  • With tokenisation in place, digital payments are likely to grow by 20-25 per cent.
  • It is considered a global best practice.
  • Mastercard offers this service in 50 countries with more than 1,500 banks that work with companies such as Samsung, Google, Apple, Fitbit, Garmin, and several others. Mastercard said it is working with all stakeholders in the Indian payments ecosystem – banks, merchants, PSPs and acquirers – to make sure that every card is token-ready.

Additional information – What is Tokenization?

  • Tokenization will replace card details with a code, called a “token,” which will be specifically for the card, the token requestor and the device being used to pay. Instead of the card’s details, the token will act as the card at point of sale (POS) terminals and quick response (QR) code payment systems. The goal of the process is to improve the safety and security of payments.