Tokenisation

In News 

• Recently, Digital payment firms and merchant bodies petitioned the Reserve Bank of India to extend the deadline for implementation of the new credit and debit card data storage norms, or card-on-file tokenization (CoF). 
  • The RBI mandate on tokenisation kicks in from January 1, 2022

What is Tokenization?

• It refers to the replacement of actual card details with an alternate code called the “token”, which will be unique for a combination of card, token requestor (the entity which accepts a request from the customer for tokenization of a card and passes it on to the card network to issue a corresponding token) and device. 
• How can tokenisation be carried?
  • The cardholder can get the card tokenised by initiating a request on the app provided by the token requestor. 
  • The token requestor will forward the request to the card network which, with the consent of the card issuer, will issue a token corresponding to the combination of the card, the token requestor, and the device.

• It is restricted to mobile phones and/or tablets only.

Benefits and Usage 

• A tokenised card transaction is considered safer as the actual card details are not shared with the merchant during transaction processing.
  • It reduces the frauds that occur by sharing card details like card numbers and CVV. 
• The token is used to perform card transactions in contactless mode at point-of-sale terminals, quick response and code payments.

Source: IE