The RBI strengthens digital payment security via CoFT via banks

  • The Reserve Bank of India (RBI) has increased the scope of card-on-file tokenisation (CoFT) services to include card-issuing banks and institutions, thereby improving digital payment security.
  • Previously, merchants were the primary providers of tokenisation services. The new notification from the RBI represents a substantial shift in this approach.

Understanding the Importance of CoFT

  • Card-on-File (CoF) Concept: Historically, retailers maintained client card details (CoF) on their platforms, posing security threats to financial data.
  • Tokenization Method: To reduce the danger of data breaches, the RBI used tokenisation, in which a unique token replaces actual card details at the merchant’s end.
  • Regulatory Requirements: The RBI mandated in March 2020 that payment aggregators and merchants not hold actual card data in order to reduce system vulnerabilities. Following industry requests, the deadline for compliance was extended until December 2021.

Implementation of CoFT by Card Issuers

  • Channels for Token Generation: Customers can produce CoFT tokens using mobile and online banking, providing a convenient and safe method for digital transactions.
  • approval and Authentication: Token production necessitates clear consumer approval and the validation of an Additional Factor of Authentication (AFA), ensuring user control and security.
  • Cardholder Flexibility: Cardholders can tokenize their cards at any time and choose certain merchants for token maintenance.
  • Token Issuance: Tokens can be issued by either the card network or the issuer, resulting in many layers of security.

Impact and Adoption of CoFT 

  • Improving Safety and Convenience: CoFT strives to secure card data without compromising card transaction convenience.
  • Timeline for Implementation: The RBI launched CoFT in 2021, with a complete rollout beginning on October 1, 2022.
  • Statistics on usage: Over 56 crore tokens have been produced since its launch, supporting transactions valued over 5 lakh crore.
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