Let’s have a look at the expected changes in detail.
What is the meaning of a card token system?
Online shopping portals like Amazon and Flipkart will no longer be permitted to retain customer details such as card information that was expected to help with faster transactions. Card details will now be replaced with a unique token which is expected to eliminate the need of storing card details on various e-commerce portals.
The unique token will be generated in real-time based on a combination of factors such as, the card type, the token requester and the device through which the request has been made.
How does the new card token system work?
Today, while making online payments, users have to enter their CVV number available on the credit card. This results in the e-commerce websites having complete access to information on a user’s debit or credit card. But now, this is expected to change. E-commerce websites will not be able to store your card information anymore. Instead, there will be a ‘token system’ established to make the payments.
In layman terms, with the new card token system:
- A user does not need to enter his/her credit card details in the token.
- A unique alternate number known as ‘token’ will be linked to the user’s credit card. This token will ensure that the user’s card details remain safe.
- While making payments for shopping on any e-commerce website, a user will not have to enter his/her 16-digit credit card number. All they have to do is enter the token number.
The token manager takes in requests from customers for creating a token for selected card transactions. This gets carried forward to the card network for processing. It is also used for transactions related to QR Code payments and point-of-sale terminals.
How will the new card token system help?
With the new card token system to be effective from January 1, 2022, users will not have to share their card details with any third-party sites or apps. Therefore, if you are supposed to, you order food online or are trying to book a cab. Currently, you have to provide the card details and the complete details of the same are saved on the e-commerce website being used. This gives rise to the risk of fraud.
As the card token system will soon replace this mechanism, the risk of fraud is expected to be reduced. Considering token creation will be a one-time effort, it may save time for users who would have otherwise had to enter credit card information to ensure the safety of the transaction.
What are the steps to be followed in token transactions?
Here are the steps that a user has to follow for token transactions from January 2022:
- The user must initiate a request on the application available from a token requester.
- As per RBI guidelines, tokenization can be done through mobile phones or tablets. This will include all transactions made through contactless cards and QR codes.
- When a user will attempt a transaction on any of the different digital platforms and wallets, the token providers will be requested for a token who will then verify it with the user’s bank.
- Once the verification of data is done, a unique code gets generated. This cannot be modified and gets irreversibly paired to the user’s device.
- Users who are making multiple payments through the same device need not worry. All platforms will be in a position to authorize the payment by sharing the token.
- This process will also do away with the need to share user information each time a new transaction is initiated. It aims to make the process quicker and safer at the same time.
- Card companies including Visa and Mastercard are expected to begin functioning as Token Service Providers (TSPs). These companies will be responsible for providing users with the tokens on e-commerce platforms and even for allowing any mobile payments.
Conclusion
Although the above-mentioned changes with regards to online card payments will likely make the process a lot easier, what is remaining to be seen is its implementation. This will decide upon the safety factor and also the overall efficacy of the process. Needless to say, whenever an online financial transaction is involved, it is best to practise utmost care by checking for the level of safety guaranteed by the platform.
Meta Descriptions
With the introduction of the ‘token system’, your credit card payments from January 2022 will likely be much safer, especially as you continue to do online purchases.
