The Reserve Bank of India (RBI) completely revised the regime for automatic payments online, leaving online merchants gasping, with the effect from October on the current year.
Online merchants and Payment aggregators now need to bolster another potentially disruptive development from 1Jan 2022.
As a result of the RBI’s concerns around alleged data leaks in the fintech space involving volumes of card information on Payment aggregators and online merchants cannot store card and certain payment data, which are effective from the new year.
As an alternative solution implemented as tokenization of card data by the central bank. A balanced approach is unavoidable to consider the interests of all stakeholders, consumers, e-commerce merchants, and fintech players.
The RBI should consider a transition timeline of 6-12 months for solutions such as implementing the tokenization, and given that extensive technological, operational, and integrational aspects are required to be developed, tested, and deployed in the payments ecosystem.
The two years seem an adequate timeline for the implementation of the new regime.
The actuality is that reportedly over 70% of standing instructions failed on October 1, 2021, and many continue to fail.
It is temporarily because banks did not implement the requisite infrastructure on a timely basis, as they were not to the legally mandated by the RBI.
Those are affected were consumers their subscriptions payments were interrupted, and many were not be able to re-register under the new management.
That urged users to do the payment procedure manually, this leading to a reduced payment success rate and loss of revenues for merchants.
Tokenization of the talk of the town:
The storage restrictions will be required for the users to fill in details for every online transaction on their card or another payment instrument.
The manually is affected by its payment latency rates, user experience, continuity of customer service, and revenues of online merchants. Besides, auto-recurring payments would not be possible. This would agitate online subscription services, irrespective of whether the services are for consumers’ earning a livelihood or enjoyment. Examples include domain registrations and web hosting services.
The tokenization of users’ payment instruments like credit cards are needed their consent and additional validation, and the same process is required for a replaced or renewed instrument.
This appears difficult because a user who gets a new card would need to re-register it, though the new card has the same cardholder details as the old one and has linked with the same bank account and customer ID.
The RBI should cede relaxation in re-tokenizing renewed/replaced cards linked to the same user account.
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