Watch now #LawWiser premium video on “Proposed Tokenisation of Cards by the RBI” featuring Gaurav Bhalla, Partner at Ahlawat and Associates sharing useful insights on RBI card tokenisation.
Gaurav explains the background, how tokenisation works, types of tokenisation, applicability, effects and much more in this video. He shares that tokenisation of debit and credit cards allows the generation of a ‘token’ number or an ‘alternate code’ to replace the 16-digit card number entered by the customer. Each token will be unique to the requestor, the user’s card, and the device with which the card is registered. The token request is made by the merchant of the online platform (on behalf of the card-holder or card owner) to a card network (eg – Visa; Mastercard and others) which will then issue a token.
There are different types of tokenisation available like
(i) Format preserving tokens – These tokens replace the 16-digit numbers on a card with an altogether different set of 16-digit numbers.
(ii) Non-format preserving tokens – This system does not follow the 16-digit number format; and. replaces the original 16-digit card number with alphanumeric characters. Entities such as Razorpay uses non-format preserving tokens.
The system of tokenisation has been introduced by the RBI and is only applicable to domestic transactions. Tokenisation is used only for online transactions and is specific to a merchant.
The Reserve Bank of India issued a notification dated January 8, 2019, titled ‘Tokenisation –
Card transactions wherein it was announced that card networks for tokenisation in card transactions for a specific use case. This announcement extended to all uses cases/channels [e.g., Near Field Communication (NFC) / Magnetic Secure Transmission (MST) based contactless transactions, in-app payments, QR code-based payments, etc.] or token storage mechanisms (cloud, secure element, trusted execution environment, etc.). However, at that point, this facility is offered only through mobile phones/tablets.
Don’t forget to watch the full video to learn all about the Tokenisation of cards by RBI on LawWiser.
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