Card Tokenization

Mains Marks Booster     5th August 2023        
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Introduction: Card Tokenization is the process of replacing original card details with an alternative code called a "token" that should be unique and provides an additional degree of protection for customer credit card details. Recently, RBI has made tokenization mandatory for all credit and debit cards used in online, POS and in-app transaction.


  • It involves giving each payment method a special token that is unique to it. 
  • The customer is not required to pay any fees in order to use this service for tokenization and de-tokenization.
  • Actual card data, token and other relevant details are stored in a secure mode by the authorized card networks. 
  • Token requestor cannot store Primary Account Number (PAN), i.e., card number, or any other card detail.
  • The customer may use any card registered with the token requestor app to complete a transaction, and they are also free to set and change daily and per-transaction quotas for tokenized card transactions.
  • Tokens will also be a 16-digit number but consumers do not have to remember these.
  • Merchants need to create a token reference number so that fraud could be detected and eliminated in the specified time.

Card Tokenization


  • Safer-Since the actual card data are not given to the merchant during transaction processing, tokenized card transactions are regarded to be safer.
  • Speed-Aids merchants in delivering a consistent user experience and higher transaction approval rates with speed and security.
  • Consumer experience-Lowers hassle in the checkout process as consumers will no longer be required to repeatedly enter their card information once a token has been issued.
  • Innovation- along with UPI, it is inculcating advanced innovation in payment system providing impetus to digital India.


  • Inadequate user awareness
  • Apprehensions that it may reduce online card payments and may give fillip to wallet transactions.
  • Major hit on the provisions of instant pay outs and cashback given in credit card transactions.

ConclusionIn India, tokenization is a fundamental shift that requires all the stakeholders in the payment ecosystem – acquirers, issuers, card networks, banks, and fintech’s, among others – to do their part to help ensure a secure digital payment environment.

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