Tokenisation and Authentication Services in India: RBI Sets New Standards

The Reserve Bank of India (RBI) has taken a significant step by requiring that tokenisation and authentication services be provided on an open and interoperable basis. Through its recently released Authentication Mechanisms for Digital Payment Transactions Directions, 2025, the regulator has mandated that if a device or operating system supports tokenisation, this capability must be available to all applications and payment providers within that ecosystem, rather than being restricted to the company that developed it.

Impact on Global Tech Giants

This decision carries considerable implications for major players such as Apple Pay and Google Pay, which hold a competitive advantage globally by restricting essential features like NFC chips, secure elements, or tokenisation systems to their apps. For instance, on an iPhone, Apple Pay is the only application that can access the device’s NFC chip and tokenisation setup, effectively excluding third-party applications and positioning Apple as a gatekeeper in mobile payments. This approach has enabled Apple to secure a significant portion of digital transactions in regions like the US and Europe, where regulators are still deliberating over the anti-competitive consequences.

RBI’s Disruption of Established Models

RBI’s regulation challenges this existing framework. By demanding open access, the regulator highlights that if tokenisation is available on a device in India, platforms such as PhonePe, Paytm, or SBI’s application must have equal access. This could lead to a transformation in the competitive landscape of India’s payments sector, preventing major tech firms from monopolising essential infrastructure and ensuring that Indian fintech companies are not excluded from advanced authentication technologies.

The Role of Tokenisation in Payment Security

Tokenisation, which replaces sensitive card numbers with randomly generated tokens during transactions, has emerged as the global standard for securing payments. While both Apple and Google have utilised this technology to assert dominance within their ecosystems, RBI’s framework guarantees that no singular entity can monopolise tokenisation in India.

India’s Unique Regulatory Approach

In essence, India stands out as one of the few significant markets taking proactive steps to dismantle walled gardens in digital payments. This regulatory position could provide local fintech firms with a fair competitive environment while compelling global corporations to liberalise their closed systems if they wish to operate within the country.