Industry sources and bankers said the Reserve Bank of India’s plan to move towards card tokenization could impact many companies ranging from major e-commerce firms and food delivery firms to lenders, while the use of cash is on the rise.
reserve Bank of India The guidelines issued in March 2020 stated that merchants would not be allowed to save card information on their websites to promote data security. It issued new guidelines in September 2021, giving companies a chance to comply with the rules and giving them the option of tokenizing by the end of the year.
Tokenization is a process by which card details are replaced by a unique code or token, which is generated by an algorithm, allowing online purchases to be made without exposing card details, in order to improve data security. .
RBI has ordered all companies in India to purge the saved credit and debit card data from their systems with effect from January 1, 2022.
Merchants and bankers argue that they have not been given enough time to comply with the changes, while running out of tokens will mean customers will have to manually enter their card details every time they complete an online purchase. will be required, which may put off some customers.
Sijo Kuruvilla George, head of the Alliance of Digital India Foundation, a New Delhi-based think-tank, said, “Introducing an additional step in payments increases friction and several studies show that customers can opt out of discretionary purchases. ” Represents Indian Startups.
“We anticipate revenue losses of around 20-40 per cent for traders, with smaller firms being more adversely impacted,” he said.
Meanwhile, senior officials at state-owned banks and private lenders said they worried the move would lead to a significant drop in card transactions and cash payments in short-term, undone years of work by lenders and the government to boost digitization. will increase. ,
“All banks are not going to be ready by January and even if there are, customers can opt for one-step cash on delivery instead of providing details to avoid inconvenience,” said a banker. The Indian lender, who asked not to be named as it is not authorized to speak to the media.
“So not only will there be a drop in card transactions but also cash in circulation, which is another concern.”
Credit card transactions in India crossed Rs. 1,00,000 crore figure in October, while other modes of digital payments have also seen a sharp rise in the last few years.
The industry is still waiting for clarity on how the cash back schemes and monthly-installment type card purchases will work and has asked the central bank for more clarity and time, said an executive of an internet firm, which provided information I asked not to be named. It is not public.
“RBI expects the entire industry to move to tokenization, full testing, in less than four months, this is very extreme demand from the industry,” the executive said.
RBI did not immediately respond to an email seeking comment on the matter. companies like heroineWalmart’s Flipkart, and Indian food delivery firm zomato, which is likely to be affected, also did not immediately respond to a request for comment.
Industry executives say even if some card networks, banks and merchants are ready, it could take months to ensure the processes are fully integrated and seamless.
“It may take another six to nine months for the entire ecosystem to be completely ready,” said Manas Mishra, chief product officer of the payments firm. payu,
© Thomson Reuters 2021