Card payments get a tech lift as fintechs expand device tokenisation

Fintechs are racing to scale device tokenisation for cardholders in India, streamlining payments across merchants and driving sharper checkout conversions along with higher spending.

 

Device tokenisation is a payment solution that encrypts card details with secure codes, thereby storing them on a device such as a phone. This can further be used to authorise transactions only from the registered device.

 

This contrasts with card-on-file tokenisation (CoFT), where tokens are stored on the merchant’s or the payment processor’s servers instead of the user’s device.

 

Merchants include small and large businesses across transaction categories such as e-commerce, quick commerce, electronics and fashion, among others.

 

“What device tokenisation solves is that once you tokenise your card on your device through an application like Cred, it then starts appearing across all merchant partners. We’re seeing about a 5 per cent increase in payment success rate whenever a user tokenises their card,” said Akshay Aedula, product and growth, Cred.

 

This means that a single tokenised card on a device can be used across multiple merchants connected to a fintech platform or payment aggregator partner such as Razorpay, Cashfree Payments or PhonePe.

 

Transaction volumes are expected to increase as device tokenisation for cardholders expands, making card tokens effectively interoperable across platforms.

 

This is because earlier, a card tokenised on a food delivery platform could not be used on an e-commerce site under the card-on-file model since tokens were stored separately by each entity.

 

“Earlier, you used to save your card on a website, which could have a history of details getting leaked. Device tokens are far more secure. Access to card-on-file tokens was also restricted earlier, and now it becomes much more interoperable,” said Reeju Datta, co-founder, Cashfree Payments.

 

The token is tied to a single device, which only allows authorised access from a single source of transaction, preventing misuse and threats of large-scale data leaks.

 

Device tokenisation can also speed up checkouts, as customers no longer need to manually enter card details for each transaction. This helps increase spending and reduces cart abandonment during the final stage of an online purchase.

 

Aedula from Cred added that more than 7 million users on the platform had tokenised around 11 million cards over the past year. He added that they have observed a 3.3 times increase in card spends since.

 

“The other thing that we’re seeing is, from an issuer lens, the cards become active. Spends on the cards increase. So, net-net, their economics also get better,” he explained.

 

Separately, PhonePe and Mastercard jointly launched a feature this year to enable the network’s cardholders to make in-store transactions via tap and pay.

 

PhonePe had said the feature would support tokenised e-commerce transactions through NFC-capable Android smartphones.