Reserve Bank of India (RBI) to enable Card-on-File Tokenization (CoFT)

Utkarsh Classes Last Updated 22-12-2023

Reserve Bank of India (RBI) to enable Card-on-File Tokenization (CoFT)

Economy 4 min read

The Reserve Bank of India (RBI) has decided to make Card-on-File Tokenization (CoFT) available directly to card-issuing banks/institutions. The central bank introduced CoFT in September 2021, with implementation beginning on October 1, 2022. According to the central bank, this will provide cardholders an extra option to tokenize their cards for numerous merchant sites using a single procedure. Previously, a Card-on-File (CoF) token could only be generated via the merchant's application or website.

Card-on-File (CoF)

A CoF transaction occurs when a cardholder authorises a merchant to keep the cardholder's Mastercard or Visa payment information.

What is Card-on-File Tokenization (CoFT)?

Tokenization is the process of replacing the cardholder's original card number with a substitute phrase known as a 'token.'
By transforming the clients' card numbers into tokens, this method provides greater card safety.
Tokenization substitutes a card's 16-digit number with a unique token unique to a user's card and one merchant at a time.
Tokenization has increased transaction security and approval rates.
CoFT creation is only permitted with express client authorisation and AFA certification.
Tokenization applies solely to domestic transactions.

Conditions

According to the new instructions published by the Reserve Bank of India (RBI) on Card Tokenization, clear card number, CVV, expiry date, and any other sensitive information linked to cards cannot be maintained by merchants for processing online transactions beginning July 1, 2022.
CoFT was announced by the central bank in September 2021, with implementation beginning on October 1, 2022.
In its October monetary policy, the RBI recommended establishing CoF token generation capabilities directly at the issuing bank level.

What is Tokenization?

Tokenization is the process of replacing card data with a unique token or code.
It enables online purchases to be completed without disclosing sensitive information.

About Reserve Bank of India(RBI)

The Reserve Bank of India (RBI) is a national institution and a foundation of the thriving Indian economy.
It belongs to the International Monetary Fund (IMF).
The Reserve Bank of India was founded on April 1, 1935, in compliance with the requirements of the Reserve Bank of India Act, 1934.
Section 45 ZB of the amended RBI Act of 1934 calls for the central government to appoint a six-member Monetary Policy Committee (MPC) that decides on the policy interest rate needed to attain the inflation objective.
Founded: 1 April 1935, Kolkata
Governor: Shaktikanta Das
Headquarters: Mumbai, Maharashtra, India