In the future it may be easier and safer for consumers to make purchases online whether paying for a latte with a smartphone app or buying a pair of sneakers online. MasterCard, Visa and American Express are advocating the use of digital tokens rather than traditional credit card account numbers when making online and mobile payments.
While consumers are clearly doing more of their shopping online, they also have more concerns about security issues and fraud. Digital tokens are designed to provide them with enhanced security. Although there is no date set to begin using this new technology, industry trade groups and companies involved are now reviewing the standards proposed.
Account numbers would be obsolete
With this new payment method, consumers would no longer have to input their credit card numbers when making an online payment. Instead they would be issued a token for each card, which would be used instead of their account number to actually process online and mobile payments. The tokens are similar in some respects to magnetic stripes on the back of credit cards which contain the consumer’s information.
Once the tokens go live, consumers would be able to request one from their credit card issuer so when cardholders want to buy something, whether it’s airline tickets or lunch at their favorite restaurant, the merchant can charge the purchase using the token rather than the credit card number.
While merchants would see a change in how they conduct transactions, shoppers would not see a difference in how they shop. However, since merchants and their employees never see the account numbers, consumers would have another layer of protection against fraud and theft.
Working it out
To actually create the digital tokens, the industry would have to develop a set of standards allowing the tokens to replace account numbers. These standards would then be used everywhere consumers shop, and across all shopping platforms, including online venues, digital wallets and mobile apps.
This is not the first time MasterCard, Visa and American Express have come together to create standards and technology to enhance card services and expedite payments. They also worked together to develop the magnetic stripes now used on the back of credit cards, as well as newer EMV and NFC technologies.