1 min read.Updated: 12 Sep 2021, 07:27 AM ISTLivemint
Mandatory tokenisation of cards and resultant customer inconvenience initially may deter cardholders from making low-value online card payments, pushing them towards UPI and wallet payments. In the long run, however, it would alleviate security concerns in online transactions
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NEW DELHI: Card tokenisation will be a near-term irritant but long-term positive, and will alla security concerns for online transactions, according to Emkay Global Financial Services. The move may, however, deter cardholders from making low-value online card payments.
The Reserve Bank of India recently issued a final circular making card tokenisation mandatory from 1 January, 2022.
Card tokenisation is a process of substituting sensitive customer data, such as card number, CVV, among others, with an algorithmically generated token (encrypted) by a token service provider, which could be the card issuer or payment networks.
Emkay Global Financial Services explains that these tokens flow through the payment system in a secured way without disclosing customer details or allowing payment intermediaries--merchants, payment aggregators--to store customer data.
This is to ensure customer data safety/security and curb rising instances of fraud/hacks. Any previously stored data, card-on-file, by merchants/payment gateways will have to be erased.
HDFC Bank, ICICI Bank and SBI Card already have the card tokenisation system in place for online transactions, while a few players have device-based tokenisation (SBI Cards with Samsung) for contactless NFC payments, as per Emkay Global.
Mandatory tokenisation of cards and resultant customer inconvenience initially may deter cardholders from making low-value online card payments, pushing them towards UPI and wallet payments. In the long run, however, it would alleviate security concerns in online transactions.
"That said, card companies will have to engage and educate customers while ensuring a smooth tokenisation process to protect their share in the payments business," Emkay Global believes.
As per industry reports, the digital payment/lending space is likely to expand. Digital payments will touch $95 trillion by FY25E from $30 trillion and gross merchandise value of ‘buy-now-pay-later’ to reach $45-50 billion from $3-3.5 billion now.
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