Fed Report Assesses Present and Future of Tokenization for E- and M-Commerce
June 15, 2015
While Apple Pay has provided the payments industry with some evidence that tokenization is implementable and scalable, it is an evolutionary process that still has issues to be addressed, according to a report from the Federal Reserve Bank of Boston . In addition to establishing viable standards, the Mobile Payments Industry Workgroup established by the Federal Reserve Banks of Boston and Atlanta said tokenization, along with the concept of “person/device present” emerging from mobile commerce provides the industry with an opportunity to revisit the card-present versus CNP framework for liability and pricing.”
The report provides an overview of payment tokenization efforts in the U.S. for mobile and digital commerce, describes how different tokenization systems currently interoperate and the status of implementation plans currently underway. The authors spoke directly to a variety of stakeholders including merchants, issuers, acquirers and processors.
“Based on our analysis, interviews, and other discussions with stakeholders, tokenization is viewed as a key component for improving the security of retail payments and protecting payment credentials by removing them from the transaction process,” the authors concluded. “Stakeholders agree that creating payment tokens as part of the consumer account enrollment process is critical to authenticating the identity of the customer and verifying the account credentials, which requires a consistent and strong identification and verification process. The payments industry has lacked a framework for securing payment credentials and the end-to-end mobile payments process until now.”