We all have a comfort level when it comes to online shopping. The ease and convenience of buying things at the click of a button and getting them delivered to our doorstep make things simpler. And when the pandemic set in, online shopping boomed.
The Indian e-retail market saw a 25 percent growth in FY21 despite the two-month national lockdown1. With the surge of shopping online, it became of paramount importance to secure financial transactions for customers.
Tokenization the next big step in payment safety
In the second half of 2021, to ensure safe transactions, the Reserve Bank of India (RBI) set up a rule that on October 1st, 2021, all previously set auto-debits would cease to exist. This was and is, an attempt to control fraud and phishing.
With this mandate in place, all linked auto-debits ceased to work until the user re-registered themselves. Every transaction needed to be authenticated by a pin or a CVV, along with a 24-hour notification to ensure there was no scope for malpractice.
A year later, an extra security measure is added to this, known as tokenization which will be in place from October 1, 2022, for debit and credit card holders.
What is tokenization?
Tokenization refers to the replacement of actual card details with an alternate code called the “token,” which shall be unique for a combination of card, token requestor (i.e., the entity which accepts a request from the customer for tokenization of a card, and passes it on to the card network to issue a corresponding token) and device. 2
What will happen when the tokenization is in place?
When the tokenization is in place on October 1st, the rules for online payments for debit and credit cards will change. The RBI has made it mandatory for all credit and debit card data used in online, point-of-sale, and in-app transactions to be replaced with tokens by September 30 this year.3
To make it simpler, tokenization actually refers to the replacement of the actual card details of the consumer with an alternate code called the “token.”
Needless to say, the process of tokenization will improve the security and safety of the online transaction process, no matter where you shop or buy.
How are big e-commerce companies ensuring this transition?
Currently, many entities, including merchants and leading e-commerce players, are in the process of including tokenization for the safety and security of their customers.
Embracing tokenization minimizes the risk of card data being stolen or misused in case the information is compromised. Platforms like Amazon are working closely with banks and networks to ensure they are ready to roll out this update. However, smaller players still need time. Unless and until preparedness is complete across the industry, it will only lead to confusion and disruption.
To wrap it up, tokenization in the industry is a big and much-needed step toward consumers’ safety and convenience. It’s good for the business ecosystem and would go a long way to help consumers feel secure with online transactions.