Reserve Bank of India (RBI) continues to refine its tokenization framework to bolster digital payment security, with key updates in 2025 emphasizing multifactor authentication, broader device support, and stricter compliance for payment aggregators and gateways (PAPG). Building on the 2022 mandate that prohibited merchants from storing sensitive card details without tokenization—effective October 1, 2022—these enhancements aim to reduce fraud risks in India’s booming UPI and card ecosystem, which processed over 15 billion transactions monthly by mid-2025. For merchants, consumers, and fintech professionals searching RBI tokenization guidelines 2025, card-on-file tokenization update, or digital payment security India, the framework replaces actual card numbers with unique tokens, ensuring safer recurring payments while aligning with global standards like PCI DSS. As RBI’s Payments Vision 2025 targets a seamless, secure ecosystem, non-compliance could lead to penalties, but tools like Plural Tokeniser offer compliant solutions.
This evolution supports India’s digital economy, where tokenization has already cut fraud by up to 90% in compliant systems.
Understanding Tokenization: RBI’s Core Security Measure
Tokenization replaces sensitive card details (16-digit number, CVV, expiry) with a unique “token”—a randomized code linked to the original data at the issuer level. This process ensures merchants never access full card info, reducing breach risks.
- How It Works: When a user opts in, the token requestor (merchant or app) sends the card to the issuer, who generates the token. Transactions use the token, with the issuer mapping it back for approval.
- Benefits: Limits fraud exposure; tokens are device-specific and revocable. RBI estimates a 70% drop in card data theft incidents post-2022.
- Eligibility: Applies to credit/debit cards; supported on mobiles, laptops, desktops, wearables, and IoT devices since 2019 expansions.
RBI’s 2022 circular mandated purging all non-tokenized data by September 30, 2022, with extensions to June 30 for implementation.
| Token Type | Use Case | Key RBI Rule |
|---|---|---|
| Network Token | Cross-Merchant | Unique per Card + Merchant + Device |
| Merchant Token | Single Merchant | Revocable with Explicit Consent |
| Device Token | Specific Device | Supports Wearables/IoT |
2025 Updates: Multifactor Authentication and PAPG Compliance
RBI’s Payments Vision 2025 document, released in June 2022 but with ongoing implementations, introduces enhancements for tokenization:
- Multifactor Authentication (MFA): Mandatory for token creation and recurring payments, including OTP alongside biometrics or device binding.
- Device Expansions: Tokens now cover laptops, desktops, and IoT, up from initial mobile focus.
- PAPG Regulations: Aggregators/gateways must comply with tokenization, with real-time complaint resolution and data protection under the Personal Data Protection Bill.
Non-compliance risks include fines up to 1% of turnover or license revocation. As of March 2025, RBI’s updates emphasize native OTP and tokenization for consumer protection.
Impact on Businesses and Consumers
For merchants, tokenization simplifies recurring billing while cutting PCI DSS costs—tools like Pine Labs’ Plural ensure compliance. Consumers benefit from fraud protection, though initial re-entry of details is required.
- Merchants: Must purge old data; 3D Secure authentication before storage. Exemptions for limited cases.
- Consumers: Explicit opt-in for recurring; easier cancellations. Fraud disputes resolved faster.
Ravi Battula of Wibmo noted: “RBI’s standards foster innovation while securing data.”
Conclusion: Tokenization’s Secure Future in India’s Payments
RBI’s 2025 tokenization expansions—with MFA and PAPG rules—fortify digital payments, aligning with Vision 2025’s seamless ecosystem. As adoption hits 100%, fraud drops, but compliance is key. For businesses, it’s a safeguard; for users, peace of mind. Will it curb breaches entirely? The tokens transform.
