What is tokenization? What are the challenges and way ahead for this unique RBI initiative?

Tokenisation is the process of replacing actual credit and debit card information with an alternate code called ‘token’. A tokenized card transaction is considered safer as the actual card details are not shared during the transaction..This token is unique for a combination of card, token requestor and device. This has been started by RBI to prevent data theft.

Advantages:

• Enhancing the security and building trust among customers.
• Makes it less vulnerable to cyber attacks.
• The safety of card data reduces the frauds related to payments.
• The token is unreadable by anyone except the payment processor, ensuring external and internal protection.

Challenges:

• The centralised card vault, where all the original cardholder data is stored before being tokenized, can be an attractive target for cyber attacks.
• Issues related to infrastructure.
• Cost of transaction fee may increase.
• The speed of transactions may reduce because of additional process of tokenization and de-tokenization during the transaction.

Way forward:

RBI’s tokenisation initiative is a right step towards enhancing data security and safeguarding sensitive information of customers.