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Readiness for tokenization not where it ought to be: Shreya Suri

Readiness for tokenization not where it ought to be: Shreya Suri


Readiness for tokenization not where it ought to be: Shreya Suri

The readiness for transition to tokenization in the payment ecosystem is not where it ought to be, said Shreya Suri, a partner with INDUSLAW and a specialist in Information Technology, Data Security Laws, Payments and Financial Technology. “There’s a lot of volume and traffic which the ecosystem has not been able to cope with,” Suri said in a Twitter Space organized by The Plunge Daily on Thursday.

On October 1st, RBI’s new tokenization system for card transactions came into effect but as many analysts had predicted, the payment ecosystem struggled to cope up with the new guidelines. Even banks like SBI and ICICI published their guidelines in the last week of September, leaving the rest of the ecosystem with a very small window to implement and test. Suri said this happened because of a hurried transition to the new system. “There are solutions for different use cases which have come in, but they have not been timely and there hasn’t been enough time to test them out. They should have taken more time,” she said.

She also stressed on how many small e-commerce merchants weren’t made aware of the nitty-gritties of the tokenization process. “Many of the Indian consumers weren’t able to understand the new process, while several small online merchants failed to adapt to the system. The larger merchants have access to all segments of ecosystem participation, but the smaller ones do not always have that liberty. Their business and user interface may have suffered due to that. Moreover, there is no uniformity in the process and not every system participant is ready,” said Suri, who has extensive experience in advising domestic and international clients engaged in e-commerce, technology, hospitality, health, financial services and manufacturing sectors.

Another thing the partner with Indus Law stressed was that a significant number of the consumers were left confused by the implementation of the tokenization process. “Many consumers today are dependent on stored card information on different platforms where they shop frequently, where they have monthly subscriptions, pay EMIs, card-related payments or utility bill payments etc. Those transactions are going to be impacted and cause delays in payments and perhaps cause them penalties. In order to avoid that situation, there had to be a lot of push in terms of consumer awareness,” she said. 

Moreover, she said that many online merchants weren’t able to comply with the new guidelines because the payment ecosystem didn’t have the necessary standardization and a ready framework. “Many payment service providers were not able to integrate tokenization successfully. You need to coordinate and register yourself with different card networks and banks to enable seamless organization through your platform and your payment integration systems. That does not seem to have happened uniformly across the space,” said Suri. “Even E-mandates were implemented at a very, very late stage by the card networks and banks,” she added.

On a question from the listeners whether the government should have given more time to online merchants, Suri said that ship has already sailed. “The directive that card information has to be deleted has already been implemented. If any merchant today is storing card information, they are of course already non-compliant. We can’t really retract what has happened,” Suri said.

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