Credit card tokenisation: What it is and how does it work?

Credit card tokenisation is the process of replacing the 16-digit number on a card with a unique combination of numbers called a token. This approach enhances the security of credit card transactions by ensuring that personal details are not included in the token.

Tokenisation is commonly used by online platforms such as food delivery apps and e-commerce websites, where users must provide their card details. The process ensures that sensitive card information is stored safely with the credit card network.

Benefits of credit card tokenisation

1. Secure Transactions: Credit card tokenisation enhances transaction security by replacing sensitive card information with a token. This significantly reduces the risk of fraud and data breaches.
2. Easier Transactions: By streamlining the payment process, tokenisation makes transactions more convenient for users.
3. Recurring Payments: Tokenisation simplifies recurring payments by eliminating the need to repeatedly share card details. Instead, the seller uses the token to process payments automatically.

How does it work?

1. Entering Card Details: When making a purchase on an online platform, users enter their card information to initiate the payment.
2. Choosing Tokenisation: After entering the card details, users select the tokenisation option provided by the shopping website.
3. Information Forwarding: The seller forwards the user’s information to the card issuer.
4. Token Generation: The card issuer generates a token and returns it to the seller.
5. Token Usage: Once the user consents to the tokenisation process, the seller replaces the actual card details with the token. For future payments, the seller uses this token to approve transactions.

Users can check their tokenisation status by following these steps:

1. Visit the bank's website or mobile app.
2. Navigate to the card services or security settings section.
3. Check the tokenisation status.

For further information, users can also contact their bank's customer support.

RBI mandate on tokenisation

The Reserve Bank of India (RBI) issued a directive prohibiting online merchants and payment aggregators from storing any card-related information. As of October 1, 2022, card numbers must be replaced with tokens.

The tokenisation process is voluntary, requiring explicit consent from the user through Additional Factor Authentication (AFA). Sellers or brands are not permitted to store card details without completing the tokenisation process. Multiple cards can be tokenized within a single application, and users can set specific limits accordingly.

Credit card issuers retain the right to decline a tokenisation request if any risks are identified. Additionally, users can suspend a token by submitting a request to the card-issuing entities.

Conclusion

In summary, credit card tokenisation is a significant advancement in securing credit card transactions. By replacing sensitive card information with a token, users are better protected from potential fraud and privacy violations.