Is it necessary to put your card details on e-commerce websites? What if your card details are lost? The prudent thought to all these questions brings us to a one-stop RBI solution called tokenization.
What is Tokenization?
While the magnitude of credit card fraud augmented with increasing theft and data leaks, RBI widened its net to curb the mishaps and bring a foolproof protocol restricting access to consumers’ data. Currently, merchants store consumers’ card details online or on a cloud-based storage system. Tokenization replaces the 16-digit number on your credit card with a unique proxy code called a token. Customers can use this token to make payments securely without physically revealing their credit card details.
This digital token ensures that a user’s card details remain only with the user and are not shared with any third-party payment processor. Instead, the details are only shared with the card issuer or the issuing bank. It will also require explicit authorization or customer consent.
Another great perk this technology brings is quick recovery from loss. Unlike the lengthy reissue procedure demanded during the event of a lost credit card, a token can be issued as quickly as a flash. Countries like the US, Switzerland, Canada, and several others have already started using the technology, and India has joined the club too.
Tokenization: The consumer’s safety net
While there won’t be any such changes in the seamlessness of customer experience, they can now carry out the transactions through a random string of tokens instead of sensitive card details. Credit card companies like VISA, Mastercard, RuPay, American Express, and Diners Club have signed up to adopt tokenization.
Without the card tokenization feature, users will have to feed their entire 16-digit credit or debit card number every time they do an online payment or transaction. Tokenization makes way for safe and secure payments for end customers and also helps in mitigating fraud. This is set to strengthen India’s payments industry.