RBI Extends Tokenization to All Consumer Devices

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Last week, the Reserve Bank of India (RBI) expanded the scope of card payment tokenization to all consumer devices. The scope was till now limited to tablets and mobile phones. Now, it will be extended to desktops, laptops, tablets, wearables like bands and smartwatches, and IoT (internet of things) devices. This means people can now make contactless or one-click payments using their smartwatch or any registered device.

In a circular, the RBI said, “On a review of the framework and keeping in view stakeholder feedback, it has been decided to extend the scope of tokenization to include consumer devices — laptops, desktops, wearables (wristwatches, bands, etc.), Internet of Things (IoT) devices, etc.”

This move from RBI is part of its initiative to eliminate third parties from storing consumers’ card details. Tokenization also intends to make it safer, secure, and convenient for consumers to make card payments. 


What is Tokenization?

Tokenization, in the context of payments, refers to a process where sensitive data such as card details are replaced by a unique non-sensitive alternate code called a ‘token’. A token has no extrinsic meaning or value and cannot be exploited. It is also unique for a card, identified device, and token requestor combination. 

Once a person registers an account with a payment network, the latter provides a token linked with a card to the registered account. Every time a card-based transaction is made, the token is shared by the account with the payment network. The payment network then processes the transaction on the card.


RBI’s Move To Improve Security and Convenience

As a token is non-sensitive data, it helps in enhancing the security of contactless transactions. Further, the Payments Council of India (PCI) had also stated that industries were working with the RBI to create solutions where consumers do not have to enter their card details each time they need to make a payment.


Consumer Device Tokenization Gets Industry Support

According to Amrish Rau, CEO, Pine Labs,

This is a great move by the RBI and will definitely help reduce frauds across e-commerce transactions and improve security standards for the industry as a whole.

Further, Vishwas Patel, chairman, PCI, said,

We welcome this initiative as facilitation in payments will have to be medium agnostic to enhance customer experience. RBI after due review has permitted this customer experience enhancing measure.


While supporting RBI’s decision, Rameesh Kailasam, CEO of IndiaTech, also said that there would be challenges if banks do not extend timely support. He said,

Such a regulation should be made mandatory for all banks, it should not be optional as is the case presently.


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