I love online shopping and find it very easy, convenient, and hassle-free. However, many people still shy away from online shopping. The main concern is the online payment system and the fear of fraud or leakage of financial data. But the good thing is that as per the RBI mandate, it is now compulsory for online transactions to be tokenized. Card tokenization in India is a good start but its success depends on a lot of factors.

What is Tokenization

Tokenization is a process that protects you while you are making an online transaction through your debit or credit cards. It converts your identifiable data into non-identifiable data (called tokens). It’s basically a way to protect you by changing your sensitive data into tokens that are not reversible and stored outside the internal system.

The best part is that numbers once converted to tokens, cannot be reversed back without the presence of original data. So, in a way, it’s much safer than encryptions which were easy to decrypt with an appropriate key. In the tokenization process, there are two main steps – Token issue and use of these tokens for online transactions.

What is the aim of Tokenization and why it’s important?

As you are aware, many Ecommerce platforms store consumer card details like card number, expiry date, etc. after a transaction. This can be risky as there are chances of the data being stolen or misused.

So, to make the whole system more secure, RBI introduced a new process. According to the RBI mandate, ecommerce platforms cannot store consumer data on their website. The rule came into effect recently and it is being replaced by two systems. One is Tokenization and the other is guest checkout. In guest checkout, a consumer has to add the card details every time they make a transaction.

Tokenization is important to safeguard a customer’s important data like bank account number, PAN card number, etc. It reduces the chances of any online data breach. But the question is – How successful is card tokenization in India till now?

Card Tokenization in India – A success or not?

Although it’s a good move and a welcome change in the online payment system, it still needs some more time to get adequately established. Also, one of the important points is that for it to be a complete success, all ecommerce giants and smaller players must be ready alike.

Tokenization and guest checkouts, both still have some challenges, and until it is taken care of, there are chances of failed digital transactions. A failed transaction means not only lower revenue for the seller but shaken confidence of the consumer which would adversely impact the digital payment adoption.

Merchants have limited visibility on token processing solutions for recurring payments like subscriptions. Again, there may be disruptions if there’s a recurring payment coming up for you, the consumer.

Among the merchants, only some have the competence to test things in-house. Many merchants rely completely on aggregators and gateways for tokenization solutions.

Industry preparedness on the whole is very important before we can say that tokenization is a complete success.

As someone who mostly shops online, anything that makes the whole process secure and safe is welcome. So, hoping for card tokenization to succeed in the coming time.