Fed Calls for Group to Explore Tokenization Standards
Sept. 29, 2014
Last week, the Federal Reserve Banks of Boston and Atlanta released a report from a June meeting conducted to discuss the state of tokenization efforts in the payments industry. The Mobile Payments Industry Workgroup, established jointly by the two regional Fed offices, said it would form a separate working group to explore issues pertaining to tokenization and how it can be employed to safeguard payment transactions.
“With the recent introductions of new platforms that use tokenization technologies including ApplePay,” said Marianne Crowe, vice president of payment strategies at the Federal Reserve Bank of Boston and chair of the MPIW, “we are even more convinced of the need to evaluate the optimal approach to tokenization and determine how the payments industry can better coordinate efforts to protect consumers and businesses alike.”
Tokenization is not a new idea. Many payment companies have implemented the protective measure in their platforms, but standards remain elusive. Several organizations, including the major card networks through EMVco , are working on specifications they hope will be adopted by the entire industry. Other stakeholders, however, are leery of the networks taking the lead on this and could welcome an effort led by the central bank, which pledged to include all take all perspectives into account.
“The final product [of the working group] will be an analysis of the state of tokenization in the payments industry and the role tokenization can play in securing the mobile and digital payments ecosystem,” Crowe said in the report. “It will include a common set of definitions and help to educate the industry on the similarities and differences between the different token use cases. Finally, in order to achieve interoperability, all of the use cases need to be evaluated on an end-to-end basis, which can best be accomplished through a multi-stakeholder assessment.”