As digital payments continue to rise, online transaction security has become paramount. Frauds and data breaches have become common, causing substantial financial and reputational losses. In this context, tokenisation has emerged as a powerful technique to safeguard sensitive payment information and reduce fraud.

This blog post explores what tokenisation means, how the process works, its key benefits, and how tokenisation enhances payment security in India.

 

What is Tokenisation?

Tokenisation refers to replacing sensitive payment card information, such as card numbers, expiration dates, and CVV codes, etc., with unique tokens or surrogate values. The token acts as a reference to the actual card details stored in a secure vault by the card network.

The tokenisation process encrypts the original card data and generates a random token value. The token is then associated with the card details and stored in the bank's or card network's secured system. During transactions, tokens are submitted instead of actual card details. The issuing bank then matches the token to card details and processes the payment.

 

The tokenisation process involves four key steps:

• Data Collection: During a transaction, the merchant or payment processor collects sensitive card data such as the card number, expiry date, CVV, and cardholder name.
• Token Generation: The collected data is encrypted, and the token service provider generates a unique token. If stolen, this token has no meaning or value.
• Token Storage: The token and related transaction data are stored in the card network's secured vault. The original card details are not stored anywhere else, ensuring the actual card data remains protected.
• Token Retrieval: When a transaction is initiated, the stored token is retrieved and matched with the actual card details by the issuing bank for authorisation. The token is useless on its own.

By replacing card information with unique, meaningless tokens, tokenisation keeps sensitive card data secure in a protected vault. Even if the tokens are compromised, they cannot be used for fraudulent transactions, adding a vital layer of security.

 

Benefits of Tokenisation

Tokenisation offers several benefits that make digital transactions more secure:

• Enhanced Data Security: Tokenisation reduces the risks associated with data breaches as card details are unavailable within the merchant’s environment.
• Fraud Reduction: Tokens have no value if stolen; hence fraud possibilities are minimised.
• Faster Transactions: Tokenisation speeds up checkout and payment processes for a better customer experience.
• PCI DSS Compliance: Tokenisation helps merchants meet compliance by removing card data from systems.
• Cardholder Privacy: Customer card details are protected as merchants have access only to tokens during transactions.

 

Tokenisation in India

To enhance the security of digital payments and reduce fraud, RBI has introduced tokenisation guidelines and mandates for ecosystem players like merchants, payment aggregators, wallets, etc. Some critical aspects of RBI's tokenisation guidelines are:

• RBI has mandated tokenisation for all merchants and payment aggregators.
• Payment aggregators and wallets are prohibited from storing customers' actual card data.
• New recurring transactions made mandatory to use tokenised cards only.
• Merchants will deploy one-time use tokens for transaction authorisation.
• Tokenisation is expected to lower payment fraud in India by over 40%, per industry estimates.

 

How Does Credit Card Tokenisation Work?

You can secure your credit card via tokenisation when you buy something online or set up an auto-pay. Just check the box and enter the OTP received on your phone to approve token creation. This unique token will now represent your card details in the merchant's system.

Next time you transact with the same merchant, your card details stay securely stored in the bank's vault. Only the token gets passed along, and the bank matches it back to your card to complete the payment. No more filling out lengthy card forms!

The tokenisation process happens instantaneously in the background. As a customer, you only need to opt in once. If you ever want to remove access to a stored token, you can revoke it.

 

A Step-by-Step Guide to Tokenise Your Credit Card

Tokenising your credit card to enhance security for online payments takes just a few simple steps:

Step 1: When making an online purchase, check the box to save your card for faster checkouts.

Step 2: Review the tokenisation disclaimer and terms, then click to accept. Enter the OTP received on your registered mobile or email to authorise token creation.

Step 3: Your card is now tokenised! The last 4 digits will be displayed for identification.

Step 4: For your next purchase on the site, select the 'saved token' option instead of entering full card details again.

Step 5: Enjoy seamless and secure one-click checkouts going forward using the tokenised card.

Tokenising cards is quick and convenient. It allows easy and secure online payments at merchants where your card is tokenised without having to enter card details repeatedly. Give it a try!

 

FAQ's on Credit Card Tokenisation

Q1. What is credit card tokenization?

Credit card tokenization is a technique to keep your credit card details safe. In place of saving your actual 16-digit card number, a unique digital token is used for online payments.

Q2. How does tokenization of credit cards work?

When you enter your credit card details for any online payment, a secure digital token gets generated. Online merchants save this token and not your real card number, enabling safe payments.

Q3. Is card tokenization mandatory?

Not for customers, however, it’s mandatory for merchants. As a customer, you can decide whether or not you want to save your card details on any merchant website or app, as per RBI rules.

Q4. Is credit card tokenization safe?

Yes, it’s one of the safest ways to pay online. Since your actual card number isn’t stored, the chances of misuse are much lower. It is mandated by RBI as fraud protection tool.

Q5. How do I enable card tokenization?

If you are a customer, you don’t have to do anything. At merchant app or website, tokenization happens automatically during payment journey when you enter your credit card details.

Q6. Can I still use my card normally after tokenization?

Yes, your credit card works just like before. Tokenization doesn’t affect how or where you can use it.

Q7. How to remove credit card tokenization?

Just go to the merchant’s app or website and delete your saved card. This will remove the token linked to your credit card.

Q8. What is the difference between credit card tokenization and encryption?

Tokenization replaces your credit card number with a unique digital token. Encryption hides the data during transfer.

Q9. What is the new RBI guideline on tokenisation?

Tokenisation was mandated by RBI in Year 2022. As per RBI directive, merchants can't store your credit card number anymore. If you choose to save your card, it can be stored as a digital token only.

 

Conclusion

Tokenisation has emerged as a powerful way to protect sensitive payment card information and reduce fraud in digital transactions. Replacing actual card data with unique tokens adds a vital layer of security. As digital payments rise in India, tokenisation assures customers and merchants against online payment vulnerabilities.

Following RBI's mandate, tokenisation has become an integral part of online transactions and help strengthen the digital payments ecosystem.