Reserve Bank of India (RBI) Promotes Card Security Measures Likely to Affect Merchants, Lenders: Report

RBI push for card security has the potential to hit merchants, lenders: Report

RBI has ordered all companies in India to delete saved credit and debit card data from their systems

Industry sources and bankers say the Reserve Bank of India’s plan to move towards card encryption is likely to hit a range of companies from major e-commerce players and delivery companies. feed to lenders, while increasing the use of cash.

The RBI issued guidance in March 2020 stating that merchants will not be allowed to save card information on their website to enhance data security. It issued new guidance in September 2021, allowing companies by the end of the year to comply with the regulations and give them the option to tokenise.

Tokenisation is a process in which card details are replaced with a unique code or token, generated by an algorithm, allowing online purchases to be made without revealing card details, in order to improve improve data security.

RBI has ordered all companies in India to delete saved credit and debit card data from their systems from 1 January 2022.

Merchants and bankers claim they don’t have enough time to comply with the changes, while opting out of the token means customers will need to enter their card details in such a way. manually every time they complete an online purchase, which could result in some customers being fired.

Sijo Kuruvilla George, head of the Think-tank Alliance of Digital India Foundation, said: “Introducing an extra step in payments adds to the difficulty and some studies suggest that customers may drop out. case of discretion” representing Indian startups.

He added: “We estimate a revenue loss of around 20-40% for merchants, with smaller companies being more adversely affected.

Meanwhile, senior executives at state-owned banks and private lenders said they were concerned the move would lead to a marked drop in card transactions and an increase in card transactions. cash payments in the short term, the work of lenders and governments to promote digitalisation. .

“Not all banks will be ready in January and even if they do, potentially to avoid the hassle, customers may choose to get one-step cash on delivery, rather than care about the details. “, a banker led. The Indian lender, who requested anonymity because he was not authorized to speak to the media.

“So not only will card transactions decrease, but cash in circulation will also increase, which is another concern.”

Credit card transactions in India surpassed the 1 trillion rupee mark ($13.13 billion) in October while other digital payment methods have also surged over the years.

The industry is still waiting for clarity on how cashback schemes and monthly installment cards work and has asked the central bank for more time and clarity, an executive said. executive at an internet company said. not public.

“RBI is expecting the entire crypto industry, complete testing, to move forward in less than four months, which is a very harsh request from the industry,” added the executive.

The RBI did not immediately respond to an email seeking comment on the matter. Companies such as Amazon, Walmart’s Flipkart and India’s food delivery company Zomato, who are potentially affected, also did not immediately respond to a request for comment.

Industry executives say that even if certain card networks, banks and merchants are already in place, ensuring that processes are fully integrated system-wide and occur seamlessly can be possible. takes months.

“It could take about six to nine months for the entire ecosystem to be fully ready,” said Manas Mishra, Product Manager at payments company PayU. Reserve Bank of India (RBI) Promotes Card Security Measures Likely to Affect Merchants, Lenders: Report

Emma James

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