RBI proposes card-on-file tokenization for debit and credit cards: What this means for online shoppers

Source: The post is based on the article “RBI proposes card-on-file tokenization for debit and credit cards: What this means for online shoppers” published in “TOI” on 10th October 2023

What is the News?

The Reserve Bank of India (RBI) Governor has recently proposed the introduction of card-on-file tokenization (CoFT) facility at the issuer-bank level.

What is Tokenisation?

Tokenisation replaces a debit or credit card’s 16-digit number with a unique token that is specific to the user’s card and specific for one merchant at a time. 

The token hides the true details of your card, so that in case a data leak happens from the merchant website, the hackers cannot misuse the card. This token contains no personal information and keeps changing. 

Tokens can be used for online transactions, mobile point-of-sale transactions, or in-app transactions.A customer can choose whether or not to let his, her card tokenized. 

What has RBI announced now for card-on-file tokenization (CoFT) facility?

RBI has introduced Card-on-File Tokenization (CoFT) in 2021 and began implementation from 2022.

Until now, the cardholders had to create different tokens through each merchant’s application or webpage.This would require time and effort from the users. 

Going forward, tokens will be created at the issuer bank level and linked to their existing accounts with various e-commerce applications. 

This will eliminate the duplication of the tokenization process at each app or website along with increased transaction security resulting in reduced card-data-related frauds.