Credit Card Tokenization: What is it and how does it work?

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

Tokenization commonly used by online platforms such as food delivery apps and e-commerce websites where users are required to provide their card details. This process ensures that sensitive card information is stored securely in the credit card network

Users can check their tokenization status by following these steps:

1. Visit the bank’s website or mobile app.
2. Go to card services or security settings.
3. Check the tokenization status.

Users can also contact their bank’s customer service for more information.

RBI Mandate on Tokenization

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

The tokenization process is voluntary and requires the user’s explicit consent through Advanced Factor Authentication (AFA). Merchants or brands are not allowed to store card data without completing the tokenization process. Multiple cards can be tokenized in the same app and users can set specific limits accordingly.

Credit card issuers reserve the right to decline a tokenization request if any risks are identified. Additionally, users can suspend the token by sending a request to the card issuing institution.

Conclusion

As such, credit card tokenization represents a significant advance in the security of credit card transactions. By replacing sensitive card information with a token, users are better protected against potential fraud and privacy breaches.