Customers have been contacted by Indian banks and merchants, who are requesting that they tokenize their credit and debit cards before the June 30 deadline set by the regulator.

This comes as a number of merchants remain concerned about the ecosystem's ability to handle transaction and tokenization volumes while avoiding payment delays for customers.

Tokenization is the process of replacing card details with a unique code or token, allowing online purchases to be made without revealing sensitive information. All retailers must destroy client debit and credit card data by June 30 and replace card payments with unique tokens for all online, point-of-sale, and in-app transactions, according to the Reserve Bank of India's newest directive.

To promote data privacy and prevent fraud in online transactions, the RBI announced in March 2020 that payment aggregators and merchants onboarded by them will be forbidden from retaining card details of clients. This was planned to take effect in June of 2021. A new implementation date of June 30 has been determined, following repeated deadline extensions.

While Indian banks and payment networks such as Visa, Mastercard, and RuPay claim that their tokenization solutions are ready, large merchants remain concerned about the scalability of the payments network and the readiness of the entire ecosystem, fearing disruptions in consumer payment experiences.

The payment industry, including merchants, has been making behind-closed-door representations to the RBI, expressing their concerns about payment use cases like guest checkouts and recurring payments, including equated monthly instalments, which have yet to be implemented in the tokenization solutions currently available.

Merchants must provide a tokenization option, in which the customer enters card information and the card is tokenized for future payments. Customers will have to enter their card and CVV credentials each time they make a payment on the platform if a merchant does not offer this option.

Several large businesses are likewise apprehensive of using tokenization for their clients due to concerns about customer experience disruptions.