Tokenization is key to mobile security

With the success of Apple Pay and similar platforms, credit card companies are throwing their weight behind mobile payments, and tokenization is a big part of those plans.

Barclays hosted its annual Emerging Payments Forum in New York this week, prompting Ed McLaughlin, MasterCard's chief emerging payments officer, and Bill Gajda, Visa's global head of strategic partnerships, to discuss their mobile strategies moving forward.

"We see consumers moving to device-based commerce," McLaughlin said. "We are getting out of the physical world where a plastic card goes to a terminal and that is just an awesome opportunity for MasterCard."

But with new payment platforms come new risks, as banks learned only too well with Apple Pay. Both companies expect tokenization to instill shoppers and banks alike with the confidence they need to elevate mobile payments to the mainstream.

The verification process is a relatively recent development, allowing digital tokens for each mobile transaction to essentially stand in for specific financial information. Users link their credit or debit card to a given platform, and when a transaction happens, it generates a sequence of numbers that is attributed to that information. The token is used to authenticate their payment so that no specific information is actually shared with the merchant.   

After the numerous, and costly, data breaches suffered by major retailers, the less information shared with them the better for both parties.

Clearly mobile payment platform developers agree. Apple partnered with Visa to incorporate tokens into its Apple Pay system, and Samsung Pay is believed to be following in its rival's footsteps when it launches later this year.

Last month, Visa also announced plans to expand its tokenization practice to Europe, scheduled to roll out in mid-April. If that launch proves successful, Gajda said the company could expand the practice even further.

"Broadly, we're focusing on the markets where it makes sense initially, and then think about those markets because the first use case is kind of these mobile wallets at the point-of-sale," he said. "We're looking at some of the sophisticated markets in Asia and looking at Brazil as an example in Latin America."

Apple Pay would be the most obvious beneficiary of more widely accepted security options, but more confident consumers should help speed up sluggish adoption of all mobile payment platforms.

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