Tokensation may aid safe Digital Transactions

Prelims level : Economy Mains level : e-governance Applications, Models, successes, limitations, and Potential
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In News:

  • The Reserve Bank of India’s (RBI) decision to allow card payment providers to offer tokenization services will ensure the safety of digital transactions and reduce chances of fraud.


    • Tokenization involves a process in which a unique token masks sensitive card details like card and CVV number. The token is used to perform card transactions in contactless mode at Point of Sale (POS) terminals
    • Tokenization is the foundational aspect of taking payment security and safety to the next level by devaluing data and replacing payment credentials with tokens
    • According to a study by Zion Market research, global mobile payments are expected to top $3.3 trillion by 2024, at a CAGR of 60% between 2018 and 2024. Tokenization is expected to increase digital transactions in India.

How the tokenization works?

  • The debit or credit card holder will create a code for a particular amount, say 500, through an app in the form of a number. That number will have the amount that can be spent, the merchant type where it can be spent as well as time within which the transaction needs to be completed.
  • Then the number can be shared with the merchant who will enter it in the mobile, to get the payment for the items sold.


  • For the customers it is a situation to rejoice as all frauds go for a toss. Because we do not need to enter my card number, CVV, expiry date etc. online, we can generate a token and make the payment. There is no risk at all for digital payments
  • No charges should be recovered from the customer for availing this service.
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