News excerpt:
A survey by Visa found that RBI's Card-on-File Tokenisation (CoFT) in India, initiated in 2021, has seen widespread success, enhancing security and transforming digital payments.
About the news:
- 88% of industry leaders found CoFT enhanced security.
- 65% believe that it increased trust in digital payments.
- 94% say it reduced data breach risks.
- 41% state that it has reduced fraud rates.
About CoFT:
- It replaces a card’s 16-digit number on the plastic card with a unique alternate number or ‘Token’, which shall be unique for a combination of card, token requestor, and device.
- These tokens can be used for online, mobile Point-of-Sale (PoS), or in-app transactions.
- The Reserve Bank Of India (RBI) 2022 directed payment aggregators, wallets, and online merchants not to store sensitive card-related customer information.
- Recently, RBI has extended the CoFT to the issuer bank-level, expanding it from merchant applications or websites.
Benefits of CoFT
- Simplified Payments: Tokenisation facilitates more manageable payments through smart devices employing augmented and virtual reality.
- Revolutionising Commerce: Issuing digital cards becomes faster, and subscription-based services are simplified, thus improving the overall consumer experience.
- Frictionless Authentication: Tokenisation, combined with biometric authentication (such as fingerprint or facial recognition), reduces card-related fraud by providing secure and seamless verification.
- Improved B2B Payments: Tokens enable businesses to issue unlimited virtual cards and set transaction spending limits, thus effectively mitigating risks.
Challenges associated with CoFT:
- Complex Integration between the systems
- Operational clarity of regulatory guidelines
- Customer Education and Awareness
Conclusion:
So far, over 56 crore tokens have been created in India, and transactions valued at over Rs 5 lakh crore have already occurred. As India pushes towards a digital economy with an increasing volume of transactions, tokenisation has immense potential to digitise the payment ecosystem further. The RBI’s visionary policies and supportive regulatory framework have been a correct step in the right direction.