The digital payments growth in India has positioned the country as a global fintech leader, with online transactions growing 80% in 2020 and UPI transactions witnessing a 120% growth last year, further accelerated by the pandemic, stated a press release issued from New Delhi on December 15, 2021.

Additionally, the current 160 million unique mobile payment users will multiply by 5 times to reach nearly 800 million by 2025, provided the government policies are focused on customer satisfaction, financial inclusion, and digitization of merchants.

The Reserve Bank of India (RBI) has released its revised guidelines on online data storage. Upon the update coming into effect in January 2022, cardholders may have to enter their 16-digit card number every time they shop online as opposed to entering the one-time password (OTP) and card verification value (CVV).

The RBI is proposing another rule change that regards banning the storage of payment card numbers by online merchants, payment aggregators, and e-commerce websites. According to RBI, ‘while the guidelines will be technology and platform agnostic, it will create an enhanced and enabling environment for customers to use digital payment products in a more safe and secure manner.’

Empower India, a leading policy think tank, organized a discussion on the new RBI regulation around digital payments to arrive at a recommendation on best practices to implement the tokenization regime, added the release.

The RBI is proposing another rule change that regards banning the storage of payment card numbers by online merchants, payment aggregators and e-commerce websites.

Let's take a look at what experts think about the issue.

Avimukt Dar, Senior and Founding Partner, IndusLaw

The RBI’s framework for processing of e-mandates institutes compliance burden on customers as well as businesses which might lead to frequent occurrence of transaction failures, hamper user experience and customer satisfaction, and limit product innovation.

Dr Aruna Sharma, Former Secretary, Government of India

Card-On-File technology has internal tokenization procedures that encrypt card data.  However, this will affect innovations such as single-click payments. It also takes refunds and dispute resolution away from the control of merchants. As per DPIIT directions, merchants are to be held responsible for frauds, but they are denied access to data on their own platform. This will lead to data aggregating being concentrated in a few hands who will be prone to cyber-attacks. Any system failure here will affect the entire chain.

Shreya Suri, Partner, IndusLaw

The preparedness of the industry will soon be under the scanner on the issue of restriction on storage of CoF data by payment aggregators and merchants and the guidelines to adopt tokenization as a possible solution. The merchant, issuer bank, payment aggregator and the acquiring bank involved in the transaction will come to rely solely on the token issued by the card network provider. This will make the e-mandate architecture redundant for many use-cases, and requires clear guidelines on the inter-play and co-existence of the two.

Ram Rastogi, Digital Payments Strategist

In India, digital payments are used by nearly 300 million consumers out of a vast population of 1.37 billion people. The Covid-19 pandemic has further pushed the impetus of digital payments, so we can expect even more acceleration in the future, with many first-time users adopting digital payments and merchants stepping up. RBI has found that the more the number of transactions grows – on average 6 billion transactions per month – it has to address the convenience and security of consumers. RBI has to assess the preparedness of the industry to be able to implement before finalising the date of commencement of the COF rule.
 

Dr Avik Sarkar, Professor, Indian School of Business, Former Head, Data Analytics Cell, Niti Aayog

With the massive increase in online transactions, protecting the security of the customer becomes important. However, the additional compliances and infra costs that comes with this, will invariably be passed on to the end consumer at a time when price of commodities are at an all-time high. While security is paramount the cost factor also has to be factored in.

Disclaimer: This report is distributed by Business Wire India. Smart Lamp is not involved in the creation of this content. However, we have edited the matter to suit our style and length.