WASHINGTON (10/4/13)--Visa Inc., MasterCard Inc. and American Express Co. have proposed using "digital payment tokens" instead of account numbers to make processing purchases online and through mobile devices safer, the companies announced Tuesday.
They propose a framework for a new global standard that would enhance the security of digital payments and simplify the purchasing experience when a consumer shops on a mobile phone, tablet, personal computer or other smart device, the companies' press release said.
Once a standard is agreed to and implemented, issuers, merchants or digital wallets providers would be able to request a token so that when an accountholder initiates an online or mobile transaction, the token--and not the traditional card account number--would be used to process, authorize, clear and settle the transaction in the same way traditional payments are processed today, said the companies.
The tokens can be restricted in how they are used with a specific merchant, device, transaction or category of transactions. Key principles driving the development of a token standard for digital payments include:
- Ensuring broad-based acceptance of a token as replacement for the traditional card account;
- Enabling all participants in the existing ecosystem to route and pass through the payment token;
- Enabling digital wallet operators, mobile application developers and others to easily and securely develop innovative payment products; and
- Improving cardholder security with tokens that are limited for use in specific environments.
About 6% of all retail sales today are conducted digitally, up nearly 200% since First Quarter 2004, according to an August report from the U.S. Census Bureau cited by the companies. As the number of digital transactions increased, so has consumer demand for increased protection of their payment information.
With a token, consumers will no longer be required to enter an actual account number when shopping online or on a smart device. Tokens provide an additional layer of security and eliminate the need for merchants, digital wallet operators or others to store account numbers.
To ensure consistency across the globe, the proposed standard for generating tokens would be based on existing industry standards and be available to all payment networks and other payment participants. Key elements of the proposed standard include:
- New data fields to provide richer information about the transaction, which can help improve fraud detection and expedite the approval process;
- Consistent methods to identify and verify a consumer before replacing the traditional card account number with a token; and
- A common standard designed to simplify the process for merchants for contactless, online or other transactions.
"For more than five decades, the payments industry has relied on standards to safely and consistently process payments," said Jim McCarthy, global head of innovation and strategic partnerships at Visa Inc. "As more consumers make purchases with mobile phones, tablets and PCs, we are committed to showing industry leadership in the development of new standards that offer the same interoperability, reliability and security as traditional card payments."
The proposed framework has incorporated the input of many stakeholders, particularly card issuers and merchants. Over the coming weeks, the framework will also be presented to other partners and independent industry bodies, such as The Clearing House, PCI Security Standards Council and EMVCo, to align and further advance the standard.