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RBI Proposes Enhanced Security for Online Transactions with Card-on-File Tokenisation

RBI's new card-on-file tokenization channels (CoFT) will allow users to generate these tokens via their bank's app or website.

RBI Proposes Enhanced Security for Online Transactions with Card-on-File Tokenisation

The Reserve Bank of India (RBI) has taken a step towards bolstering online transaction security by introducing a card-on-file (CoF) tokenization service directly at the issuer bank level. The initiative aims to provide a more secure and convenient experience for online shoppers, as well as alleviate data security concerns associated with third-party websites.

What is Tokenisation?

Tokenization is a security measure that replaces a customer’s credit or debit card details with a unique code known as a ‘token’. Traditionally, these tokens could only be generated via the merchant’s application or website. However, RBI’s new card-on-file tokenization channels (CoFT) will allow users to generate these tokens via their bank’s app or website.

How Does it Work?

Adhil Shetty, CEO of BankBazaar.com, elaborates, “Until now, the CoF token could be created only through the merchant’s application or webpage at the time of making a payment. With this new initiative, it would now be possible for users to create tokens directly at the issuer bank, thereby giving users greater control over their card tokens.” This will enable users to manage their card tokens directly from their bank accounts, without relying on third-party websites.

Benefits for Online Shoppers

According to Amit Kumar, Chief Technology Officer of Easebuzz, “Card-on-file tokenisation feature will instigate faster checkouts with CVV & OTP authentication as an additional layer of security.” This means customers won’t have to enter their card details for every purchase, while still maintaining an added layer of security.

Other Initiatives by RBI

Apart from this, RBI Governor Shaktikanta Das also announced the extension of the Payments Infrastructure Development Fund (PIDF) scheme by two years. “This decision to expand the targeted beneficiaries under the PIDF scheme will provide a fillip to the Reserve Bank’s efforts towards promoting digital transactions at the grassroots level,” commented Ramesh Narasimhan, CEO of Worldline India.

Khilan Haria, SVP and Head of Payments Product at Razorpay views this development as a major game-changer, saying, “RBI’s announcement on CoFT empowers cardholders to create tokens across merchants, eliminating payment friction and the need to enter card data manually.” Similarly, Rajsri Rengan, India’s Head of Development, Banking, and Payments at FIS, hailed the move as transformative for cardholders and the financial industry.

The new CoFT feature, slated to be implemented on October 1, 2022, has already seen over 56 crore tokens created, facilitating transactions worth over Rs 5 lakh crore, according to the RBI’s Statement on Developmental and Regulatory Policies. With this step, RBI not only aims to further secure online transactions but also to empower users with greater control over their financial data.

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