88% of Industry leaders believe card tokenisation enhanced security: Report

Enhanced security, increased trust in digital payments, and improved payment experiences are some of the key benefits consumers are receiving with rapid card tokenization, according to industry leaders, found a survey by Visa, released on Thursday. 

88 per cent of the industry executives across card issuers, payment acquirers/processors, and merchants said that the Card-on-File (CoF) Tokenisation mandate has provided enhanced consumer security. 65 per cent believe that it has Increased trust in digital payments among consumers. 

According to the Visa Tokenisation Report, 76 per cent of executives believe that tokenisation will propel contactless payments across devices and also spread across more merchant categories.

The survey also found that tokenisation has benefited the industry, with 94 per cent believing that it has reduced the risk of data breaches, and 41 per cent stating that it has reduced fraud rates.

Visa

Card-on-File Tokenisation is the process of replacing a card’s 16-digit number on the plastic card with a unique alternate card number, or ‘Token’ which shall be unique for a combination of card, token requestor and device. Tokens can be used for online transactions, mobile point-of-sale transactions or in-app transactions.

The RBI  directed the payment aggregators, wallets and online merchants (entities in card transaction/payment chains other than card issuers/card networks) not to store any sensitive card-related customer information including full card details. The CoF data storage prohibition mandate came into effect on October 1, 2022. 

Last month, the central bank extended the card-on-file tokenisation to the issuer bank-level, expanding it from merchant applications or websites. 

Rapid Card Tokenisation in India

RBI introduced Card-on-File Tokenisation (CoFT) in September 2021 and began implementation on October 1, 2022. So far, over 56 crore tokens have been created on which transactions with a value of over Rs 5 lakh crore have been undertaken. 

Visa

The Visa report noted that this is a substantial portion of its over 7.5 billion tokens issued globally, leading to card authorisation rates rising by 4.5 per cent since the introduction of tokenisation.

According to the report, Card Tokenisation helped 

1. Simplified Payments: Tokenisation facilitates easier payments, including through voice assistants and smart devices employing augmented and virtual reality.
2. Revolutionising Commerce: Issuing digital cards becomes faster, subscription-based services are simplified, and retail experiences can change, especially with grab-and-go stores.
3. Faster Token Provisioning: Simplified tokenisation processes accelerate the movement of tokens (digital representations of card information) between card issuers, destination wallets, and websites.
4. Frictionless Authentication: Tokenisation, combined with biometric authentication (such as fingerprint or facial recognition), reduces card-related fraud by providing secure and seamless verification.
5. Improved B2B Payments: Tokens enable businesses to streamline reconciliation, issue unlimited virtual cards, and set transaction spending limits, effectively mitigating risks.
6. Contextual Commerce: Combining tokenisation with social media allows users to enjoy a seamless shopping experience within their favourite platforms.

Visa

 

“As the country pushes towards a digital economy with an increasing volume of transactions, tokenisation has immense potential to further digitise the payment ecosystem. With a substantial 560M tokens already in circulation and a fast-paced growth rate, we foresee tokenisation becoming a pivotal force in the evolution of digital payments,” said Vasudevan P, Executive Director, RBI. 

According to Visa’s industry leaders survey, the catalysts behind the successful implementation of the tokenisation were strong collaboration between stakeholders,  regulatory oversight and guidance, consumer education initiatives and resilient technology. 

94 per cent of executives concurred that effective stakeholder collaboration was highly beneficial for the ecosystem. Additionally, regulatory oversight and guidance were instrumental in ensuring a smooth implementation process.

"The RBI’s visionary policies and supportive regulatory framework have positioned India as a global leader in digital payments. This has catalysed the rapid growth of digital payments and the seamless implementation of innovations like tokenisation, " said Sandeep Ghosh, Group Country Manager for India & South Asia at Visa. 

Future Potential 

Visa's industry leaders survey found that 82 per cent of executives believe that tokenisation will be used for a wider range of use cases.

They believe tokenization can help evolve the use of mobile phones for making contactless payments in retail and everyday transit (91 per cent), payments using wearables such as smartwatches and fitness bands (82 per cent), and the concept of 'Pay with Partner' where merchant aggregators facilitate device-based payments across third-party merchants (65 per cent). 

Visa

Three-quarters of executives found the implementation of tokenisation to be generally smooth, with minor issues in some instances. The primary challenges organisations encountered while adopting tokenisation were: complex integration (76 per cent), operational clarity of regulatory guidelines (59 per cent) and customer education and awareness (59 per cent).