Because of certain changes in rules and regulations towards carrying out digital transactions, the RBI has made it a mandatory requirement for all the merchants and payment gateways to ask the consumers to re-enter their card details.
You may have gotten a message from your bank a few days/weeks ago that seemed a little concerning, no?
It stated that by January 1st, 2022, all of your card information saved across apps and portals would have been promptly deleted. In other words, on the next occasion, if you wish to make an internet-based transaction using any of your cards, you’ll have to re-enter your credentials. However, the deadline has been pushed to June 30th, 2022.
And it’s not only the banks that are doing this. Swiggy and Uber, for example, have begun putting out push reminders with an identical message.
So, what’s going on here, and why are you hearing the very same story from everyone?
You might wonder how this affects anything around you.
To comprehend this part, you’ll definitely need a refresher on how things function at the moment. Considering submitting the 16-digit card number every time is an annoyance, most consumers have their card details remembered on such apps. And once you’ve done that, all you ever needed was the 3-digit CVV and the OTP to complete the transaction. Now if the card data has been completely swept off, you’ll have to start again every time — input the 16 digits, your name, the expiration date, CVV, and the OTP each time you wish to make the purchase.
Sigh! It sounds just as tedious to us as to you!
It’s an ordeal in terms of logistics. And, from July 1st, 2022, the RBI will not ask you to update your information every time you make a transaction. You can simply choose to tokenize your card.
Consider it a one-of-a-kind ID for each of your cards. It’s so distinct that each merchant will have its own ID (token). It doesn’t matter whether you’re using the same card. If you use a debit card for all of your Zomato and Swiggy purchases, for example, you’ll get one token for Swiggy and another for Zomato. Moreover, the merchant will never have access to the real card number. It’s incredibly difficult for malevolent groups to grab their hands on these sensitive facts if they don’t already know it. It’s referred to as card-on-file-tokenization (CoFT).
While strengthening client data security, CoFT will also provide consumers with the same level of ease as before, says the RBI. Under the tokenization system, there would be no obligation to re-enter card details for every transaction, contrasting to certain misgivings highlighted in the media.
So, when you click on “Buy Now”, the merchant will request you to submit your card details and confirm if you wish to tokenize your card first. The merchant will send the information to your payment processors, such as Visa or MasterCard if you want to do so. After that, the network generates a unique token for your card, which you may use to store it on the website. Everything will return to its previous state after that. You’ll need to enter the CVV and OTP, and then the transaction will be complete, as usual.
It appears to be straightforward and practical. There are, however, certain risks in the short term.
Another concern has been raised by the IT group Nasscom – The first few numbers of a card are used by merchants to identify the card network, card issuer, and the kind of card. This is how EMIs and repayments are handled. It may take longer to process these things if they can no longer hold data. So far, it’s unclear how these items will function in the tokenization phase.
How unprepared are we if tokenization were to happen tomorrow?
The deadline stretch was necessary to eliminate the possibility of concentration and to maintain a fair playing field. How? Because, if the present deadline is reached, the expected disruption in card payments will escalate the risk of concentration in alternative payment methods. Also, because banks and card networks would be the only organizations in the payments channel having access to card data, there would be an increase in dependency on them.
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