The Reserve Bank of India (RBI) has been in talks with stakeholders for implementation of tokenisation and there is no reason to delay it any further, said Deputy Governor T Rabi Sankar ahead of new card storage norms kicking in from October.
"The feedback we have from all stakeholders is that it (ecosystem) is perfectly ready. I understand there are a few participants who may not be ready, but that would probably be because of their unwillingness to comply. We don't believe that we should hold back efforts because of such laggards," he said.
The deadline to implement tokenisation has been delayed multiple times over the past two years at the request of stakeholders, most recently by three months from 30 June 2022.
Addressing the press after the monetary policy announcements, the Deputy Governor said that as per data with the central bank, 35 crore credit and debit cards have already been tokenised. He added that 40 percent of card transactions executed in September were done through tokens.
The number of tokenised cards has gone up by close to 80 percent from 19.5 crore cards in June, as per data shared earlier by the RBI.
"The value of transactions processed through tokens stands at around Rs 3 crore. We have constantly been talking to all stakeholders to ensure that the transition to the tokenisation framework happens smoothly," Rabi Sankar said.
According to RBI’s new norms, payment aggregators (PAs), payment gateways (PGs), and merchants cannot store the card credentials of customers in their databases after September 30 to ensure consumer safety.
Card on File Tokenisation (CoFT) replaces card details with a ‘token’ that is unique for each debit or credit card and merchant platform that uses it. This is an alternative that card networks such as Visa, Mastercard, and RuPay, as well as payment aggregators, payment gateways, merchants, and banks, were preparing for to meet RBI norms.
Moneycontrol had reported on September 28 that the industry is largely prepared for the implementation, however, a few teething issues are expected as tokenisation has not yet been tested with large quantities of payments.
Additionally, because of the timing of the new deadline—right in the middle of the festive season—merchants are scrambling to adopt the new payment method to prevent any disruptions and loss of sales.
The fear of losing out on festive season sales, on the other hand, has also pushed merchants to align faster with the norms.
The Merchant Payments Alliance of India (MPAI), whose members include digital platforms such as Netflix, Disney+ Hotstar, Spotify, Zoom, Microsoft, and Policybazaar, has written to the RBI twice in the last month, requesting that the regulator direct card networks, payment aggregators, and payment gateways to demonstrate that CoFT solutions perform as well as card-based processing across use cases.
With a number of MPAI merchants relying on a subscription-led model, the low success rate of tokenisation for renewal of recurring payment mandates has been a concern.
While setting up new recurring payments mandates has a success rate of 60-65 percent, renewal approval rates on these tokens are only 35-40 percent, according to MPAI's representation to the RBI last week.
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