Over the last five years, India has seen a huge rise in online purchases, first
after demonetisation and then due to the pandemic. People who were okay
with cash transactions only, slowly moved to relying on online transactions
and learning the ropes. Yet, the actual scare of data misuse remained as a
fact, and in hearts of many.

In an attempt to protect our online transactions, Government of India
has introduced TOKENIZATION. As per the latest mandate from RBI, everyone
must tokenize debit and credit cards for online transactions. While this is a
positive step towards safeguarding our data, there is expected to be some
confusion and doubt in the minds of many people. Changes are difficult to
adjust to and when it comes to online data and our finances, every bit of
caution should be practiced.

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The only way I believe that one can get comfortable with online transactions and new rules in it, is by wholly understanding what the changes entail. Let’s try to do that, shall we? As per the new RBI rules, businesses and merchants cannot store our card details any more. Tokenization will instead replace all sensitive payment details with a ‘token’ unique to every card, which will be used to make the transactions.

Previously, every time we entered our card details including the number,
expiry date, code, etc the date remained with multiple businesses increasing
the risk of the data getting stolen and misused. Tokenization will mask all
these details and show only the four-digit token number that will apply to all
online purchases and transactions.

This will apply only when you make your payments through debit or credit
cards. For people who use credit and/or debit cards for their purchases, a
token will definitely make the process easier and more trustworthy. There are
also many shoppers who resort to net banking which they find more
convenient, and if one is honest, there can be a distinct shift from net banking
to use of token for online shopping as well.

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However, there can be some pitfalls going forward. For one, recurring
transactions may not happen as smoothly as they have been in the past.
Subscriptions are one example of recurring transactions and if your payment
method is your card, the payment may not happen automatically.

And if your recurring transaction is above a certain limit, you will receive a message from the bank 24 hours before to authorise it. It’s a multi-step process, one in which you will need patience as we are all used to one-click solutions.
Also, here’s hoping that the migration of existing customer mandates based
on card numbers for recurring payments is smoothly done to the token-based
ecosystem.

While bigger ecommerce platforms like Amazon have their processes in
place, smaller merchants are still not confident about their token processing
solutions for recurring payments.

While tokenization is a promising step towards security in online transactions,
stay prepared for minor glitches till the entire ecosystem is ready. Here’s
hoping that smaller merchants too can can be ready soon, making all our
online purchases simpler and more convenient.