Know about the security protocol of credit card tokenization and protecting sensitive information during online transactions.
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The Reserve Bank of India (RBI) is taking significant steps towards the security of users. In light of the same, RBI issued directives for the digital wallets, payment aggregators, financial institutions and merchants not to store any sensitive information of the customers.
With effect from October 1st, 2022, card-issuing companies would provide the credit card tokenisation service, which substitutes your actual card details with a unique identifier known as a token. This way, you can carry out transactions safely without exposing your personal data.
When you initiate a payment, you input your credit card details into the system. A tokenization system gathers this data, including your bank account number, credit card number, expiration date, CVV, etc.
After that, the payment processor encrypts your card details and substitutes it with a unique code. Even if a scammer or a fraudster gains access to this code, they cannot use it to extract your card information and execute unauthorised transactions.
The database of the system saves the tokenised information and transmits it via the payment network for your future transactions. This means you do not need to enter your credit card details each time you make transactions online, and your actual data remains secure.
Now that you know what credit card tokenization is and how it works, here are some advantages you should note:
Protects Sensitive Data
By converting your credit card information like your card number, CVV code, date of birth, expiration date, etc. in a tokenised format, it helps protect your data by reducing the risk of data breach.
Makes Recurring Payments Convenient
By tokenising your credit card information on apps, websites and other payment software, you can make repayments easily. Since your data is already saved in the system, you do not need to enter it each time you make a payment.
Wide Acceptance in Online Payment Systems
Most of the apps, websites and payment platforms allow the credit card tokenisation service. You can use it on e-commerce websites, to pay your car’s EMIs, to order food from food delivery apps, etc.
Eliminates the Need for a Physical Card
As your credit card information is saved on the payment platforms, you do not need to take your credit card out and fill in the card number, CVV code and other details each time.
Compliance with the RBI
It also helps businesses meet the RBI guidelines regarding the implementation of safe digital payment methods.
The credit card tokenization service is available across various platforms and sectors. Here are some examples of sectors and platforms where tokenization is used frequently:
Online transactions
You can make use of the tokenisation service on e-commerce websites and apps, as it helps save your card details for future reference while securing your data
Financial transactions done through customer support
Call centres also utilise this service during transactions conducted over the phone to protect the financial data
Payments through Wallets
You can also enable this facility while using mobile wallets to make recurring payments safely through your smartphone
Here are the steps to activate this service:
Input your required card details, including your card number, expiration date, CVV code, etc.
Navigate and choose the ‘Tokenize Your Card’ option
Enter the one-time password or the OTP that you will get on your registered mobile number
After that, a token linked to your credit card will be created, and when you make a payment on the same platform next time, only the last 4 digits will be visible
Here are some key differences between tokenisation and encryption of credit cards:
Parameters |
Tokenisation |
Encryption |
Uniqueness |
Tokenisation creates unique tokens for each data, even for identical data |
Encryption creates identical results for the same data and key |
Generation |
It generates the token randomly |
It transforms texts into cipher text mathematically |
Data Type |
It is utilised for structured data fields |
It is used for structured as well as unstructured data fields |
Data Exchanges |
Tokenisation makes it hard to exchange data, as it needs direct access to a token vault |
Encryption is suitable for exchanging data with third parties who possess the encryption key |
Format Preservation |
Tokenisation can preserve the data in the original format without compromising the security |
Format preservation depends on the type of data, and it may reduce the security |
Data Protection |
Original data remains safe as it never exits the system |
Original data can go out of the system in an encrypted format |
Frequently Asked Questions
Why should businesses invest in tokenization?
Businesses must invest in card tokenization for Payment Card Industry (PCI) compliance to make recurring payments convenient by eliminating the need of entering your card information each time. Also, it enhances payment experience for customers and allows a variety of payment options.
What is the benefit of tokenisation?
The primary benefit of tokenization for credit cards is that it safeguards your personal financial data and helps avoid fraudulent activities that can lead to financial losses.
How does the process of registration for a tokenization request work?
The registration process for credit card tokenization involves selecting the tokenisation service on the payment page of the merchant, selecting your card issuer, and validating the request via OTP or your banking app. After the registration, tokenisation helps secure your card details by substituting them with a token.
Is there any limit on the number of cards that I can request for tokenisation?
No, you can carry out tokenization on any number of credit cards.
How do I tokenize my credit card data?
For credit card tokenization in India, select the tokenization service on the payment page of the merchant, choose your card issuer, and validate it through OTP or your banking app.
Is it safe to tokenize credit cards?
Yes, credit card tokenization is completely safe as it substitutes your actual credit card information with a token.
What happens if I do not tokenize my card?
If you choose not to tokenize your credit card, you will need to enter your card information each time you execute transactions online. This makes you prone to financial fraud.
