Why tokenization of debit and credit cards UPSC IAS trending dose. The Reserve Bank of India (RBI) extended the deadline given to online merchants and financial payments companies for the tokenization of card data used for online transactions. Online merchants and financial payments companies demanding RBI to extend the deadline saying that they lack the infrastructure necessary to comply with the RBI’s Order by December 31, 2021.

What tokenization of cards

When we shop online or even book tickets on travel portals, we tend to save our credit card details on those websites. So, you just don’t need to remember your card details each time you shop. Just enter the CVV and check out in seconds.

But that was risky. If your online site or travel portal gets hacked, your card details could be leaked. Besides, you may have also saved your card details on some websites years ago and forgotten all about that.

This is a process of converting your card details into a unique token that is specific to your card and only to one merchant at a time. This code masks the true details of your card, without which no one can misuse your card. This token can be saved on the online portal’s server.

Companies are largely required to comply with RBI’s Order by next year’s deadline. When the RBI first came up with the Order to eliminate card data, it had ordered companies to comply with its Order by June 30, 2021, a deadline which it later extended to the end of 2021.

Various Types of Plastic Money

Different types of cards on the basis of use are listed below:

Debit Card: When a transaction is made from a debit card, the funds are withdrawn directly from the user’s bank account. Debit is the most common type of plastic money used by people. The majority of transactions are made while online shopping and ATM cash withdrawal. 
Credit Card: While using a credit card users can withdraw money or borrow according to their limit. These cards are issued mostly by the bank but also from various non-financial institutions. 
Charge Card: Users with charges are required to clear their balance shown in their statement within the given time limit issued to them. It can be considered a short-term loan. 
ATM Card: These cards are used to withdraw money from the Automated Teller Machine or ATM. ATM cards can be separately issued or a debit card can also be used as an ATM card.

The above mentioned are the major types of cards commonly used. Apart from these, other types are listed below:

Stored Value Card
Fleet Card
Gift Card
Digital Currency
Store Card issued by any particular company to make transactions at their places only.
The card can also be differentiated on the basis of technology some of which are listed below:

Magnetic Strip Card: Magnetic strip was introduced on cards in the late 1970s. Magnetic strips contain the data which can be read-only through physical contact or swiping action. Magnetic stripe cards have PINs with them which have to be provided in order to authenticate the transaction.
Smart Card: These cards contain a chip which is an integrated circuit. Smart cards also contain magnetic stripes.