According to bankers and merchants, the Indian central bank(RBI) is unlikely to extend a deadline set for firms to add a second layer of security for customer credit card information on Friday even if some worries about failed payments and revenue losses persist.

Smaller merchants have asked for a postponement of the compliance date, but the central bank has given no indication that there will likely be one, according to three banking and merchant sources with knowledge of the situation who spoke to Reuters.

The push for an extension from the ecosystem side hasn't been strong, and we haven't heard anything to suggest one either, according to a banker with a sizable state-owned bank. 'The general sense is that banks, card networks, and (bigger) merchants are better prepared,' the banker said.

It will be a surprise if it occurs, he continued. By requiring businesses to tokenize cards by September 30th, India started a massive initiative three years ago to safeguard card data.

To improve data security, the process of tokenization involves replacing card details with a special code or token generated by an algorithm. This process enables online purchases without disclosing card information.

The RBI first introduced the norms in 2019 and after several extensions has ordered all companies in India to purge saved credit and debit card data from their systems by Oct. 1, 2022.

While banks, card companies and large retailers are prepared, smaller merchants may face trouble which they say could lead to revenue losses for them in the short-term.

Merchant associations have also reached out to the central bank to see if they can be given more time.

Some merchants and bankers also fear card-related transactions may drop in the short-term after tokenisation norms are introduced. Rohit Kumar, founding partner of public policy consulting firm TQH Consulting, stated that payments 'seem to reduce the moment an extra layer or impediment is imposed, and there are concerns that initially we may see reoccurring dip by similar levels to what we had experienced.'

Recurring payments were reportedly failing by 10% to 15% as the prior tokenization deadline drew closer.

In addition to payments, Rajaram Suresh of Boston Consulting Group explained that since card information won't be held on the merchant servers, various post-transaction flows and other items also need to be stress tested.

European stakeholders have been urged to tokenize cards for security reasons, he continued, unlike India where it has been made necessary.

Analysts contend that tokenization is necessary in light of the fact that by 2026, digital payments are predicted to hit the $10 trillion mark. According to data from the central bank, fraud using credit cards or online purchases has increased and accounted for 34.6% of all fraud instances in FY21.

Customers will adopt this faster without much chaos this time around because it makes online transactions more secure, according to Jagdish Kumar, senior vice president of Worldline India. People are used to one-click checkout, so adoption may take more time. Some people may switch to using cash.