Cybercrime had been a rampant issue that caused havoc in the recent past. Even developed first-world countries like the USA, the UK, and Russia had fallen victim to cybercrimes on numerous occasions. Indians have witnessed rising fraudulent transactions, phishing, and scamming during the extended first phase of Covid -19 lockdown. This had somewhat shaken the trust of common men in online transactions.

According to RBI regulations, neither merchants nor payment aggregators are permitted to keep client card information on their platforms from October 1, 2022. Only card networks or concerned banks have the authority to save card information. To make the process seamless and efficient, the card tokenization system will come into effect from October onwards.

What is Card Tokenization?

Card tokenization is the technique of substituting sensitive card information, such as the card number, CVV, and expiration date, with a randomly generated string that has been constructed using cryptography.

Once a card is tokenized, the created card token can be utilized for processing payments as an alternative to sharing card credentials, thus minimizing the danger of loss of sensitive card details while making electronic payments.

Working Principle Card Tokenization

 Erstwhile, you need to share your card details with the merchant or the retailer to make a card or online payment. The credentials you share used to be saved in the storage of the service provider.

Let’s go through a case study for a better understanding.

Case Study

Assume you order a reclining chair from the XYZ e-commerce site. Once you choose the item, the site will ask you to proceed with the payment. You would enter your card details and make an online payment for the reclining chair. As of now, XYZ has the authority to save the data you entered. How would you know that?

If you visit the XYZ site for the second time and place an order for a water purifier, it will not ask you to add your card. It will simply present you with the details and you need to confirm the card. As a safety measure, e-commerce sites used to send an OTP to verify the authenticity. However, the card information saved on a server is always vulnerable. If the server is attacked by hackers, your card details will be surrendered.

Importance of Token Vault

Card tokenization helps you avoid the risk of exposing your card details to hackers. A complete solution is Token Vault. To save businesses from having to search for different payment partners, it provides capabilities for saving tokenized cards as well as the capability to transfer funds using tokenized cards. Have a quick look at the features of a token vault.

• No manual intervention: Businesses can use a simple integration to connect the Token Vault to their platform. Once linked, Cashfree Payments handles both saved card functionality and payment processing.
• Minimize risk efficiently: Any retailer who wants to offer their consumers the save card option will have to present them with a token rather than storing the real card number. Merchants will be able to do so easily with the aid of Token Vault. In return, it will minimize the risk of exposing customers’ sensitive financial details to hackers.

RBI Guidelines for Card Tokenization

• Even if they are PCI/DSS compliant, payment aggregators, payment gateways, and merchants are not permitted to keep card numbers on their systems.
• Card networks and issuing banks are only authorized to provide token provisioning services to retailers and keep card numbers.
• The RBI circular must be complied with by all businesses by September 30, 2022.

Card tokenization is thus becoming the new normal from October and every business should comply with the regulations to avoid undesired repercussions.