Daily News Analysis » Tokenization

Tokenization

Recently, the Reserve Bank of India has introduced card-on-file (CoF) tokenisation norms which aim at improving the safety and security of card transactions.

Why in the News?

Recently, the Reserve Bank of India has introduced card-on-file (CoF) tokenisation norms which aim at improving the safety and security of card transactions.

Key Points:

About

Card tokenization 

    • Card tokenization refers to the replacement of actual card details of customers stored by businesses with an alternate code or token.
    • Tokenisation can be performed only by the authorised card network and the list of authorised entities is available on the RBI website.
    • The customer need not pay any charges for availing of this service.
    • The customer’s consent and OTP-based authentication are required for creating a token.
      • Then, a token is used to perform card transactions in contactless mode at Point Of Sale (POS) terminals, Quick Response (QR) code payments, etc.
  • Devices Supporting Tokenisation:
    • Mobile Phones, Tablets, Laptops, Desktops, Wearables (wrist watches, bands, etc.), Internet of Things (IoT) devices, etc.

Utility:

  • Enhanced Security: A tokenised card transaction is considered safer as the actual card details are not shared with the merchant during the processing of the transaction.
  • Secured Information: It will cut the chances of card information leakage.
  • Easy card management: With tokenization, one can also keep track of all your cards and the merchants they have been tokenized with.

What is a Card-on-file transaction?

  • CoF is a transaction where a cardholder has authorised a merchant to store the cardholder’s Mastercard or Visa payment details. 
  • The cardholder then authorises that same merchant to bill the cardholder’s stored Mastercard or Visa account.
  • E-commerce companies and airlines and supermarket chains normally store card details in their system for quick payments.