In a move aimed at strengthening India’s digital payments ecosystem, the Reserve Bank of India (RBI) has unveiled a sweeping new framework for authentication. Titled “Authentication Mechanisms for Digital Payment Transactions, Directions, 2025,” the guidelines set out a risk-based and technology-agnostic model designed to curb fraud, bolster consumer trust, and align India with global security standards.
When the rules take effect
Cross-border card-not-present (CNP) transactions: Beginning October 1, 2025, Indian issuers must honor requests from overseas merchants or acquirers for Additional Factor Authentication (AFA) validation.
Domestic transactions: By April 1, 2026, all regulated entities will be required to implement the new authentication framework across payment channels.Who needs to act
Banks and issuers:
- Recalibrate risk engines.
- Adopt alternative methods such as biometrics, tokenization, app-based approvals and behavioral analytics.
- Communicate proactively with customers about evolving security processes.
Non-bank payment system operators (PSOs) and gateways:
- Upgrade API and SDK integrations.
- Certify new authentication techniques.
- Strengthen governance and compliance structures.
Cross-border players:
- Update transaction flows to support AFA validation requests from Indian issuers.
- Align protocols with Indian regulatory expectations.
Broader impact: security and innovation
- Fraud mitigation: Multi-factor and risk-based checks are expected to raise significant barriers for fraudsters.
- Space for innovation: Biometric tools, device fingerprinting and behavioral signals may find mainstream adoption.
- User experience challenges: Security enhancements must avoid introducing unnecessary friction into everyday payments.
- Global alignment: The framework brings India’s payment security architecture closer to international best practices.
The Bottom Line
RBI’s new blueprint is more than a compliance mandate. It is a signal to the industry: an opportunity to inspire trust, accelerate innovation, and prepare India’s digital economy for the challenges of the next decade.
