According to bankers and merchants, the Indian reserve bank is expected to extend a deadline set for firms to add a second layer of protection for customer credit card information even if certain concerns about rejected payments and revenue losses continue on Friday.
Smaller merchants have asked for a postponement of the compliance date, but the central bank has given no indication that there would likely be one, according to three financial and merchants source with access to the situation who spoke to Reuters.
A comment request sent through email to the Reserve Bank of India (RBI) was not answered.
According to a banker at a sizable state-owned bank, “the general perception is that banks, cards networks, and (bigger) retailers are better prepared, therefore the pressure from eco-system perspective for an extension has also not been enormous and we haven’t gotten any signal to recommend an extension either.” It will come as a surprise if it does, he continued.
India began a significant campaign three years ago to protect card data by requiring businesses to tokenize cards by September 30.
Card information is replaced by a unique code or token generated by an algorithm, strengthening data security and allowing online purchases without exposing card information.
The RBI originally enacted the regulations in 2019 and, following many extensions, has mandated that all Indian businesses delete any stored debit and credit card information by October 1, 2022.
Smaller businesses may run into difficulties, which, according to them, might result in lost revenue for them over the short term, despite the fact that banks, card firms, and huge shops are prepared.
Additionally, merchant groups have contacted the reserve bank to request an extension of time. After tokenization standards are implemented, several retailers and bankers worry that card-related transactions may temporarily decline.
Payments frequently stop if a new element of friction is introduced. There are also concerns that at first, we might have repeated dips at levels similar to what we had noticed.
Rohit Kumar, a co-founder of the public policy institute, Repeated payments failed by 10% to 15%, according to merchants, while the prior tokenization deadline was approaching.
Since card information won’t be held on the merchant servers, Rajaram Suresh of Boston Consulting Group noted that in addition to payments, other items need to be benchmarked including what goes when an item is returned and other post-transaction activities.
In contrast to India, where it is required, European stakeholders have indeed been urged to tokenize cards for security reasons, Suresh continued.
Analysts contend that tokenization is essential at a point when digital payments are anticipated to exceed the $10 trillion level by 2026.
According to data from the central bank, fraud involving card or online transactions has been on the increase and accounted for 34.6% of all fraud instances in FY21.
Customers will embrace this faster this time around without much commotion, according to Jagdish Kumar, senior director of Worldline India.
Because consumers are used to one-click checkout, he continued, “adoption may take longer time, and many individuals may switch to cash.
Author: Astha Singh
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