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Importance of EMV tokenization in digital transactions

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Tokenization is a medium of empowering customers and ensuring a secure and seamless environment for digital payments. The use of tokens for payments brings together both convenience and security for all stakeholders.

Importance of EMV tokenization in digital transactions
India has been witnessing constant innovation in the advancement of its cashless economy. All stakeholders have contributed to have India consistently moving towards adopting and using numerous digital solutions for payments. Digital banking and payment solutions witnessed a surge during the pandemic and gained more importance than ever before.
A new step towards enhancing the security of payment ecosystem has been taken by the Reserve Bank of India (RBI) with its guidelines on mandating payment networks tokenization in the country now extended to June 30, 2022 from the earlier deadline of December 31, 2021. According to RBI’s circular, only banks and networks will be allowed to store customers’ card data. This includes e-commerce use cases as well (so-called CoF “card-on-file”); Therefore Payment Aggregators and e-commerce merchants shall replace all current genuine CoF with EMV tokens for better user experience, increase payment authorization rates for online purchases and to prevent fraud.
An added layer of safety in digitised payments through tokenization
EMV tokenization is safer than storing card details as it eliminates the risk of hackers accessing sensitive information. It helps protect payment account number by substituting it with non-sensitive data, as its usage is limited to a either a given device or a given merchant. Under the EMV standard guideline, the tokenized payment account number is created in the same size and format as the original data to be fully compatible with the existing card acceptance network.
With EMV tokenization, when a person gives his/her consent to pay with a card online, a token corresponding to that payment account number for storage is requested to the payment network. Subsequently, whenever that person initiates a transaction using the stored payment credentials, the token will be used along with dynamic data to process payment transaction. Each token is bound to a specific merchant, thus even if hackers get access to this token, it will be useless for them. Due to higher assurance in the integrity of payment transaction and added layer of security, banks tend to approve tokenized transaction at a higher rate. This higher approval rate result in significant monetary value for merchants and increased customer confidence thanks to better user experience.
What eMerchants and payment processors need to remember?
EMV Tokenisation will help all the stakeholders in the payment ecosystem. eMerchants and payment processors should consider tokenization as a transformational change delivering a better customer journey because of a friction-less payment experience.  It also translates into:
  • Faster time to market: Time to market is essential criteria to comply with RBI mandate and token aggregator service should be able to help merchants and payment processors to achieve quick time to market by avoiding multiple integration.
  • Highly Scalable Service: The scalability of the service is important to support the growth of business and to enable convenient user experience over multiple channels.
  • Future ready: Digital cards are center pieces for all next coming payment innovations
  • Payment success rate: EMV tokenization deployed by eMerchants translates into a higher approval rate, improving merchants’ revenues and cardholders’ satisfaction
  •  EMV tokenization leads to an enhanced and seamless user experience as it eliminates the need to enter and re-enter the account number for subscription accounts as card renewal is managed automatically.
    Tokenization is a medium of empowering customers and ensuring a secure and seamless environment for digital payments. The use of tokens for payments brings together both convenience and security for all stakeholders. This is a landmark movement not only towards ease and accessibility but also a significant development in the digital revolution of India.
    The author, Ashish Saraf, is VP and Country Director- India at Thales. The views expressed are personal
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