Changes to online debit and credit card payment rules starting next month: know the details

Debit, credit card tokenization: From next month, every Indian who transacts online using a debit or credit card will be required to remember their card details every time they make a payment, as these rules will change in from July 1. From this date, the Reserve Bank of India, or RBI, which is responsible for setting the banking rules in the country, is implementing the card tokenization rule, whereby if a customer does not tokenize their card from credit and debit card, he will need to enter the details each time he makes an online payment.

Will RBI implement card tokenization from July 1?

Last year, the RBI issued guidelines on debit and credit card tokenization prohibiting merchants from storing customer card data on their servers. This was to protect and secure customer data. The central bank has mandated the adoption of card-on-file (CoF) tokenization applicable to domestic online purchases. The deadline for nationwide adoption of card tokenization has been extended by six months, from January 1 to July 1, 2022, to ensure a smooth transition from the current situation.

The RBI previously announced the rule on March 17, 2020, in which it asked merchants to give their opinion on the creation of a new payment system for cardholder security in India. On December 23, the Reserve Bank of India issued a new notification on tokenization, indicating that the deadline had been extended.

However, this time there will be no such extension as the payment ecosystem is by and large ready to implement the card tokenization rule. “I really don’t think there’s any need to speculate on whether or not the deadline will be extended. There are a few collateral issues that have been brought to our attention, which we will address as we go along. This are new issues that arise every time you change your regime,” RBI Deputy Governor T Rabi Sankar had told reporters at a post-MPC meeting on June 8.

What will change with the new rule?

According to the new rule, when you start buying an item from a merchant, the merchant will initiate tokenization. It will ask for your consent to tokenize your card. Once you have given your consent, the merchant will send a tokenization request to the card network. The card network will then create a token, which will proxy your 16-digit card number, and send it back to the merchant. The merchant will keep this token for future transactions. You will also need to enter your CVV and OTP as before to approve the transaction. If you wish to use another card, the same process must be followed again.

However, the debit and credit card tokenization process is not mandatory and a customer can choose whether or not to leave their card tokenized. In this case, the customer will have to re-enter all the card details when making any online purchase.

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Elaine R. Knight