RBI Tightens Digital Payment Security: Authentication Directions 2025
In a decisive move to strengthen India’s rapidly expanding digital payments ecosystem, the Reserve Bank of India (RBI) issued the Authentication Mechanisms for Digital Payment Transactions Directions, 2025. These directions redefine how digital payment security must be implemented across banks, fintechs, payment aggregators, and non-bank PSPs.
Applicability: All digital payment transactions in India, unless explicitly exempted
Why RBI Issued These Directions
With rising transaction volumes, increasing fraud sophistication, and growing consumer reliance on digital payments, RBI aims to ensure:
- Uniform and robust authentication standards
- Lower fraud risk and improved consumer confidence
- Clear accountability for issuers and payment participants
- Alignment with India’s data protection and privacy framework
Core Principle: Mandatory Two-Factor Authentication (2FA)
RBI mandates a minimum of two factors of authentication for digital payment transactions.
- First factor: Customer credentials
- Second factor: Something the user has, knows, or is
- For most digital transactions (excluding card-present), at least one factor must be dynamic
Examples of Acceptable Authentication Factors
- SMS / app-based OTP
- PIN or passphrase
- Software or hardware token
- Biometrics (fingerprint, device-native, Aadhaar-based)
- Card hardware or secure element
Key Additional RBI Requirements
- Interoperability & Open Access: Services like tokenisation must be offered across use cases
- Risk-based approach: Issuers must actively monitor and manage suspicious transactions
- Issuer responsibility: Ensuring authentication integrity, compensating customers for losses, and complying with the DPDP Act, 2023
Transactions Exempted from 2FA
- Contactless small-value card transactions
- E-mandates (excluding first transaction)
- Prepaid instruments (gift cards, mobile wallets)
- NETC / FASTag transactions
- Offline small-value digital payments
- Corporate card travel bookings via global distribution systems
Cross-Border Transactions: Special Treatment
While the directions do not apply broadly to cross-border digital payments, RBI requires card issuers to validate non-recurring, cross-border card-not-present transactions by 1 October 2026 when authentication is triggered by overseas merchants.
Need Help Becoming RBI-Compliant?
Achieving compliance with RBI’s 2025 authentication directions involves technology upgrades, risk frameworks, interoperability readiness, and alignment with DPDP Act obligations.
If your bank, fintech, or payment business wants to be compliance-ready before April 2026, consider working with a specialized compliance and risk partner.
👉 M2P Fintech – ACS (Access Control Server)
https://m2pfintech.com/acs
M2P Fintech’s ACS practice helps organizations design, implement, and operationalize RBI-compliant authentication, fraud risk management, and regulatory frameworks at scale.
