001. National | Digital
India’s digital payment ecosystem is undergoing a transformative shift, thanks to the rapid adoption of card tokenisation. As of December 2024, over 91 crore tokens have been issued, powering more than 320 crore transactions valued at nearly ₹11 lakh crore. With 98% of online transactions now processed without using actual card data, tokenisation is redefining security standards in e-commerce.
What is Tokenisation?
Tokenisation is the process of replacing sensitive card information with a unique, non-sensitive identifier known as a token. This token is:
- Unique to a customer’s device or merchant
- Used as a substitute for real card data during transactions
- Designed to ensure merchants never store actual card information
This greatly reduces the risk of data theft and enhances overall payment security.
The Evolution of Tokenisation in India
The journey of tokenisation in India began with device tokenisation in January 2019, followed by card-on-file tokenisation in September 2021. These initiatives were spearheaded by the Reserve Bank of India (RBI) in response to major data breaches such as those involving MobiKwik and Juspay.
To further strengthen digital security, the RBI mandated in October 2022 that businesses must stop storing card data, pushing tokenisation to the forefront of secure digital payments.
How Tokenisation Works
- Customer Input: Card details are entered during a transaction.
- Token Generation: The system replaces the card number with a unique token.
- Secure Storage: Original card data is securely stored in a token vault.
- Verification: The token is verified against the stored data during the transaction.
This process ensures that sensitive information never leaves a secure environment.
Benefits of Tokenisation
- 🔒 Enhanced Security: Card data is never exposed during transactions.
- ✅ Simplified Compliance: Easier adherence to PCI DSS standards.
- 💰 Reduced Risk: Merchants face lower chances of data breaches.
- 📱 Broad Compatibility: Works seamlessly with mobile wallets and other modern payment systems.
Tokenisation vs. Encryption
| Feature | Tokenisation | Encryption |
|---|---|---|
| Method | Replaces data with a token | Scrambles data using an algorithm |
| Reversibility | Irreversible (non-sensitive) | Reversible with a decryption key |
| Use Case | Ideal for payment data storage | Ideal for secure data transmission |
| Cost & Complexity | More cost-effective and simpler | Requires complex key management |
Conclusion
The adoption of tokenisation is a major milestone in India’s journey toward secure, fast, and seamless digital payments. With the RBI’s strong regulatory push and the increasing volume of online transactions, tokenisation is not just a trend—it’s the future of digital payment security.
