TOKENISATION ADVANTAGES
1. Context
The Reserve Bank of India (RBI) has mandated the tokenisation of credit/debit cards for online merchants from October 1.
Till then, the card details for online purchases were stored on the servers of these merchants to help customers avoid keying in their details every time they shopped with that merchant.
2. Tokenisation
As per the RBI's FAQ on tokenisation updated late month, tokenisation "refers to the replacement of actual card details with an alternative code called the 'token', which shall be unique for a combination of card and the token requestor (i.e. the entity which accepts the request from the customer for tokenisation of a card and passes it on to the card network to issue a corresponding token)."
| If you use a mobile app or a website for online purchases, the merchant can, on your behalf but only with your explicit consent, raise a request for a token with the card issuing bank or the card network such as MasterCard. |
3. Necessity of Tokenisation
- When you visit a restaurant or even an ATM, card thieves can clone your card with a skimmer, a gadget that quitely reads the magnetic strip at the back of your card.
- Similarly, hackers can also break into online websites and mobile apps that store your credit card details.
- Con artists can access millions of cards in one go and sell them on the dark web as a result of such breaches.
- To help lessen the chances of such fraud, some banks have mandated the use of an OTP delivered to your registered mobile number to withdraw cash at ATMs.
- Other banks have enabled services on their mobile app to allow cash withdrawals without the physical use of cards.
- Some credit card-issuing banks allow limits that you can set up yourself, per day, per transaction, etc on the bank's app.
- The Tokenisation mandate of the RBI is a similar exercise in caution.
4. Card Fraud
- As per the RBI annual report 2021-22, in FY2O there were a reported 2, 677 cases of card fraud via the internet involving ₹129 crores.
- While in FY21, the number of cases decreased to 2, 545, further increased to 3, 596 cases in FY22 with the amount involved being ₹155 crores.
5. Advantages
- The RBI says that a tokenised card transaction is safer than the actual card details are not shared with the merchant.
- Even if a hacker/scammer were to get their hands on one's token number, they would not be able to make indiscriminate use of it.
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The token generated upon request for a specific merchant is unique to a specific card number and is usable only on that particular site or mobile app. The token is useless outside of that merchant's ecosystem.
The new mandate is only for the use of credit/ debit cards online. For offline merchants, users would continue to swipe the cards on the POS machines as per previously existing guidelines.
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- The concept of tokenisation through the example of a metro train ticket. It is useful only for that route and not for any other.
- Similarly, the unique token generated for a specific site is only applicable on that site and nowhere else.
- If an undesirable third-party gains access to that specific token and shops within that specific website, the chances of identifying the party are more as their login and phone details would be with the site.
- However, regardless of whoever you shop with, be it Amazon or Ola or Swiggy, the app should ask your permission to use your credit card details for it to tokenise your card.
For Prelims & Mains
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For Prelims: Tokenisation, RBI,
For Mains:
1. What is tokenisation and discuss its necessity and advantages (250 Words)
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Source: The Hindu
