Card tokenization deadline extended by RBI by 6 months

On Thursday, the Reserve Bank of India (RBI) announced the extension of the deadline for the card–on–file tokenization (CoF), that is implementation of new credit and debit card data storage rules, to June 30, 2022, thereby extending the deadline by six months. The announcement by RBI follows calls by merchant bodies, digital payment companies, and banks seeking more time to enable the integration of their systems and bring all the stakeholders on board.

“In light of various representations received in this regard, we advise…the timeline for storing of CoF data is extended by six months, ie., till June 30, 2022, and post this, such data shall be purged,” RBI said in a notification addressing all payment system providers as well as payment system participants. It said additionally, “Industry stakeholders may devise alternate mechanism(s) to handle any use case (including recurring e-mandates, EMI option, etc.) or post-transaction activity (including chargeback handling, dispute resolution, reward/ loyalty program, etc.) that currently involves/requires the storage of CoF data by entities other than card issuers and card networks.”

As per the new deadline of June 2022, the credit and debit card data of the consumers should be eliminated from the companies’ and merchants’ online systems. Additionally, the merchants can devise any alternate system to handle cases such as recurring e-mandates, EMI option, or post-transaction activity like dispute resolution, a reward program that requires the storage of CoF data by the companies.

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RBI had issued a notice in September 2021 under which the merchants were banned from storing card details of the consumer on their servers. This was supposed to be in effect from January 1, 2022. Card-on-file, or CoF, refers to “card information stored by payment gateway and merchants to process future transactions.”

The deadline extension was done citing the unpreparedness of the industry to handle a big change in operations. If the mandate was implemented as decided earlier, it would have led to major process disruptions and loss of revenue. “Disruptions of this nature erode trust in digital payments and reverses consumer habits back towards cash-based payments,” Merchant Payments Alliance of India (MPAI) and the Alliance of Digital India Foundation (ADIF) said in a joint letter to the RBI.