Mastercard, Visa Team on Tokenization
Mastercard and Visa have joined forces in a bid to help fast-track the adoption of tokenization for mobile and online payments—and, eventually, payments via connected devices within the Internet of Things (IoT). A new partnership between the rival networks enables tokenized Mastercard payment credentials to be provisioned into Visa Checkout, and, in turn, tokenized Visa credentials to be provisioned into Masterpass.
Both networks’ digital wallet platforms already incorporated tokenization, which replaces sensitive card data with non-sensitive equivalents that themselves have no value if compromised. Masterpass began offering tokenization in early 2016 and Visa Checkout in early 2015, but only for each network’s own branded cards. Prior to the new deal, a Mastercard could be loaded into Visa Checkout and vice versa, but could not be tokenized on the other network’s platform—but that’s set to change with the cross-provisioning agreement, which is scheduled to take effect in the U.S. in the second half of 2017, with a global rollout to follow.
The networks hope the reciprocal pact will drive the spread of tokenization throughout the payments ecosystem by making the feature interoperable between the card brands’ platforms—enabling merchants that accept one digital wallet to provide tokenized transactions to cardholders using the other network’s cards as well. “With most merchants, consumers and financial institutions having multi-brand relationships, it’s important for us to deliver products that simplify the experience and ultimately lead to greater adoption of tokenized transactions,” Vish Shastry, vice president, merchant solution delivery and commercialization, Visa Digital Products, tells Paybefore.
The cross-platform tokenization capability could help the networks “better compete with the mobile payment solutions from Apple, Google and Samsung,” all of which offer tokenized transactions across multiple card brands, says Tim Sloane, vice president, payments innovation, Mercator Advisory Group.
Tokenization technology also is expected to play a key role in the growth of payments made via connected devices, which some experts project will comprise between 20 and 30 percent of all payments by 2020, notes James Anderson, executive vice president of digital payment products, Mastercard. “It’s not just laptops, tablets and phones being used to make payments; rather, you’re seeing things like wearables and IoT devices—including some household appliances like refrigerators—becoming payment devices as well,” Anderson wrote in a blog post discussing the agreement.
The Mastercard-Visa deal is the latest indication that payments providers are recognizing the importance of offering consumers choice—even if it means opening their platforms to other parties. Earlier this month, PayPal reached deals with Citi and FIS to enable consumers to pay with bank-issued cards and accounts within the PayPal app for in-store and mobile purchases, giving up some transaction fees while gaining increased transaction volume and remaining at the center of the payments process. That deal followed agreements PayPal reach earlier this year with Mastercard and Visa to stop steering users away from paying with cards in favor of ACH.