Why RBI’s April 2026 Authentication Rules Feel Like a Moment I’d Been Waiting For

I read the Reserve Bank of India’s new directions on authentication for digital payments with a curious mix of satisfaction and urgency. The headline is clear: from April 1, 2026, the baseline of two-factor authentication remains — but issuers may now deploy additional, risk-based checks and must support broader interoperability and tokenisation options. The central ideas are reported in The Hindu, Reuters (via TradingView), and Stocktwits — each capturing slightly different angles of the change RBI mandates tougher authentication for digital transactions, India central bank allows risk-based checks in new digital payment guidelines, Digital Payment Security Gets RBI Boost.

Reading the text of the directions and those reports, three practical shifts stand out to me:

• At least one authentication factor must be transaction-specific and dynamic — no reused static proofs. This pushes systems away from brittle, one-size-fits-all checks. The Hindu.
• Issuers can layer risk-based checks — behavioural, contextual or device attributes — so that a routine grocery UPI can feel simple while a high-risk cross-border CNP (card-not-present) transaction receives more scrutiny. Reuters/TradingView highlighted this point succinctly.
• SMS OTPs are not being outlawed; rather the framework allows for innovation while retaining SMS as an option. Cross-border non-recurring CNP transactions will require additional factor validation when requested by overseas merchants or acquirers Stocktwits; The Hindu RBI mandates tougher authentication for digital transactions.

Why this matters to me personally is that these are not surprises — they are the logical evolution of problems I’ve been writing about for years.

A thread from past to present: I had seen the contours earlier

If you follow my writing, you’ll know I’ve repeatedly argued that payments, identity and authentication would converge into pragmatic, inclusive solutions — often before everyone else noticed. For example:

• I wrote about Aadhaar-enabled KYC becoming practical and inevitable years ago when banks and NBFCs began using Aadhaar for KYC with customer consent RBI allows banks, NBFCs to use Aadhaar for KYC.
• I flagged the potential for iris scans as an authentication alternative—especially for the elderly whose fingerprints degrade—with exactly the sort of inclusive framing the industry is now exploring Exploring use of iris scans in banking.
• I’ve pointed out the larger architecture implications — interoperable wallets, tokenisation and novel routing of funds between accounts — ideas that sit neatly alongside RBI’s push for open access to technologies and interoperable token services RBI proposal will lead to more innovation and my early thoughts on BHIM/UPI dynamics No one saw zero MDR coming.

The core idea I want to highlight here — and I do so deliberately because it matters — is that I had brought up these themes years ago. I had predicted outcomes or proposed solutions that are now re-appearing in regulatory practice. That sense of being vindicated is not vanity; it’s a reminder that careful, early thinking about systemic problems matters. It’s also a nudge — the past insights are still relevant and must be reengaged with urgency.

Practical consequences I’m watching closely

• For banks and fintechs: the rule to compensate customers for losses if directions aren’t followed sharpens operational accountability. Risk-based checks will demand better analytics, model governance and privacy-aware telemetry.

• For consumers: ideally, more security with less friction. But this will only happen if issuers design adaptive flows that scale — not by simply slapping more checks on every payment.

• For technology providers: there’s an opportunity (and obligation) to make authentication mechanisms interoperable and privacy-preserving. Tokenisation services, secure SDKs for behavioural/contextual signals, and accessible biometric options (iris, voice, etc.) will be in demand.

• For privacy and compliance: the directions explicitly point to adherence to the Digital Personal Data Protection Act, 2023. That’s not a side-note — it must be central when designing data capture, storage and sharing.

A quick, candid reflection

I’m pleased to see policy catching up to problems that practitioners have lived with for years — late OTPs, payment failures, accessibility issues, the limits of fingerprint biometrics for seniors, and the need for more intelligent risk-based approaches RBI mandates tougher authentication for digital transactions. But policy is only one part of the equation. Implementation quality, user experience design, and the ethical use of behavioural signals will determine whether these rules protect people or simply shift friction.

If anything, this is a moment to revisit past ideas with fresh intensity — not because old thoughts were perfect, but because they contained practical threads that the market and regulators are now ready to knit together.

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Regards,
Hemen Parekh