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What Is Card-On-File Tokenization And How Does It Help Protect Your Financial Data?

June 30, 2022 / 02:18 PM IST

We live in an age where digital payments are ubiquitous: we buy our groceries online, most of our entertainment comes from subscriptions to OTT platforms, our phones are filled with apps and games that we pay for or subscribe to. And this isn't just an urban trend, or one limited to the educated elites; everyone from our bosses to our bhajiwalas engage in the digital economy today.

This brings enormous convenience, but also carries certain risks. Credit cards are, by and large, one of the safest ways to transact online; but in recent years, even credit cards have been hit hard. Losses from online card fraud were estimated to reach almost $8 billion in India by the end of last year, up from about $6 billion in 2019. The trend looks similar globally as well - it isn't a problem limited to India.

India does, however, have a solution already. In September of 2021, the Reserve Bank of India mandated that all authorized card networks needed to adopt tokenization, to better protect consumer data from third party attacks. In simple terms, this means that no one other than yourself or your card issuer will be able to store your actual credit card data. The date for compliance was originally set for Jan 2022, and subsequently extended to 30th Sept  2022.

So, what is tokenization, and how does it help you? Let's use the example of a lost cheque to illustrate this. If you lose your cheque book, are you concerned? Not particularly, as you haven't signed any of these cheques yet. The bank wouldn't honor them because they lack 'authorisation'. Similarly, if someone just has your credit card number, they can't do much damage, if they don't also know your CVV number, expiration date, and the exact spelling of your name.

Now, if you lost a signed cheque, it should worry you because anyone who has the cheque can now take money out of your account. Ditto your credit card information: if someone has all the information they need to transact with it, it's a problem. But would you worry if the lost cheque was a crossed cheque made out to someone in particular? No, because then the only person who is authorized to use that cheque is the person you made it out to! There is no risk of misuse by a third party. Before tokenisation however, there was no way to recreate this situation with your credit card: once your credit card information has been stolen by a third party, there is no way to bring it back.

Tokenization solves just this problem. The process is simple. Say, you regularly buy your groceries from an e-commerce website. Instead of storing your credit card information, you now store a token number. This token number is only valid for that particular e-commerce website and that credit card. Even if the website is hacked, no third party can use this token, because it is, in essence, a crossed cheque!

How can you get on the tokenization train? If you’re a Mastercard customer, you're in luck because Mastercard was one of the first to tie up with merchants! Mastercard customers have had the option to tokenize as far back as Dec 2021. Moreover, Mastercard has simplified the process to just three steps:

  1. Add your card details on the merchant website or mobile app.

  2. Agree to 'securely' save your card, for future use. You only have to do this once!

  3. Enter OTP

And voila! You’re done! If you prefer video instructions, you can watch this charming video of M.S. Dhoni as he explains the process here.

With tokenization, you still experience all the ease of using your Mastercard: everything from the best in class user experiences, all the way to the new and improved security features that come with tokenization. You'll also experience quicker checkout times on merchant websites and apps because once these tokens are created, they are saved on these provider platforms - no need to remember or re-enter your details each time! Also, the whole system is automated, so no more false declines on your credit card!

For Mastercard, your peace of mind is priceless! For smoother, safer and faster transactions with your Mastercard, head to


Moneycontrol journalists were not involved in the creation of the article
Tags: #Features
first published: Jun 30, 2022 11:15 am
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