The Reserve Bank of India’s plans to move towards card tokenisation is to hit a wide range of companies from major e-commerce firms and food delivery firms to lenders, while increasing the use of cash, said industry sources and bankers.
RBI issue guidelines in March 2020 saying that merchants will not be allow to save card information on their websites to boost data security.
It issue fresh guidelines in September 2021 giving companies until the end of the year to comply with the regulations and offering them the option to tokenise.
Tokenisation is a process by which card details are replace by a unique code or token, generate by an algorithm, allowing online purchases to go through without exposing card details, in a bid to improve data security.
The RBI has order all companies in India to delete save credit and debit card data from their systems from 1st January 2022.
Merchants and bankers argue they have not been given enough time to comply with the changes, while opting out of tokenisation would mean a customer would need to manually key in their card details each time they complete an online purchase, which could put some customers off.
Sijo Kuruvilla George, who heads the New Delhi-based think-tank Alliance of Digital India Foundation, which represents Indian startups, Said :
“Introducing an additional step in payments adds friction and several studies show that customers may end up dropping out in case of a discretionary purchase,”.
“We estimate revenue losses of about 20-40 percent for merchants, with the smaller firms being more adversely impacted,”.
Senior executives at state-own banks and private lenders said they worry the move will lead to a marked decline in card transactions and an increase in cash payments over the short-term, undoing years of work by lenders and the government to boost digitisation.
Credit card transactions in India cross the Rs. 1,00,000 crore mark in October while other modes of digital payments have also seen a sharp uptick over the years.
The industry is still waiting for clarity on how cash back schemes and monthly-installment type card purchases will work and has ask the central bank for more clarity and time, said an executive at an internet firm, who ask not to be name as the information is not public.
The RBI did not immediately respond to an email seeking comment on the matter.
Companies like Amazon, Walmart’s Flipkart, and Indian food delivery firm Zomato, who are likely to be affect, also did not immediately respond to a request for comment.
Industry executives say that even if certain card networks, banks and merchants are ready, ensuring that the processes are fully integrate system-wide and are seamless can take months.
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