Beginning On October 1st, New Credit And Debit Card Regulations Will Apply

The RBI’s card-on-file (CoF) tokenization regulations will take effect on October 1, 2022, changing the regulations for debit and credit card online payments. The new regulations should enhance cardholders’ ability to make payments.

The original July 1 deadline for the tokenization rules was extended by three months to September 30. The majority of significant retailers have already complied with the RBI’s CoF tokenization requirements.

Cardholder comfort and convenience are two reasons why a lot of organizations, including merchants in an online payment chain, maintain cardholder data. While this technique does offer some convenience, the danger of data exploitation is increased by keeping card information with numerous organizations.

Tokenization

The RBI defines tokenization as the process of replacing actual card information with a different code known as the token, which must be distinct for each of the following: card, token requestor (the organization that accepts customer requests for card tokenization and forwards them to the card network to issue a corresponding token), and device (referred hereafter as identified device).

This token, which stands in for the customer’s credit card information, is saved in the retailer’s payment system and used to complete the purchase.

Advantage of tokenization

Since the real card details are not given to the merchant during transaction processing, tokenized card transactions are thought to be safer.

How is tokenization carried out?

By starting a request on the app that the token requestor has provided, the cardholder can have their card tokenized. The token requestor will send the request to the card network, which will provide a token matching the combination of the card, the token requestor, and the device with the approval of the card issuer.

Is it possible to enable tokenization using a smartwatch or similar gadgets?

Consumer electronics like mobile phones, tablets, laptops, desktops, wearables (wrist watches, bands, etc.), Internet of Things (IoT) devices, etc. all have the tokenization capability available.

Effect on consumers

The card information of a customer will not be stored by entities or platforms in any way. For instance, when users make their first purchase on an e-commerce site, they are prompted to enter their 16-digit debit card number followed by the CVV code. To make a purchase, users only need to enter the CVV and then the bank will produce the OTP, as they can see when they purchase another item from the same platform and the site has already stored their 16-digit card number.

A customer will now be required to enter all of their credit card information while making a purchase under the new RBI order. The merchant will start tokenization once consumers begin making purchases and will request permission before tokenizing a card. The merchant will submit the request to the card network after receiving approval.

The token, which serves as a stand-in for a card number, is created by the card network and sent back to the retailer. This token will be kept on file by the retailer for future transactions. They will now have to enter their CVV and OTP, same as previously, in order to approve.

News Mania Desk