American Express, MasterCard and Visa this month unveiled an
initial proposal for developing a global standard for online shopping, designed
to "enhance the security of digital payments and simplify the purchasing
experience," according to the credit card networks. The new standard,
which incorporated the "input of many stakeholders," including card
issuers and merchants, would allow issuers, merchants or digital wallet
providers to use a digital 'token' instead of a shopper's card account number to
process a transaction.
"With a token, consumers will no longer have to enter
personal account information when shopping online or on a smart device,"
Visa global head of innovation and strategy partnerships Jim McCarthy explained
via email.
American Express Global Network Business head Mike Matan
said tokens already are used in similar ways as account numbers for such uses
as redeeming offers, paying bills and initiating purchases online or in a brick-and-mortar
store. Often, he said, account numbers are tokenized to "provide security
to the cardholder," even if the cardholder does not know a token is being
used instead of the actual account number.
"As more consumers make purchases online with mobile
phones, tables and PCs, we think it's important to establish the foundation for
a global, interoperable payments environment now in advance of digital payments
taking off in the marketplace, Matan said.
The proposed process, according to McCarthy, will provide an
additional layer of security by eliminating the need for merchants, digital
wallet operators or others to store card account numbers.
The proposal would be based on "existing industry
standards" and be available to all payment networks and "other
payment participants," according to the companies. The standard would
include more data fields to provide "richer" transaction information
to improve fraud detection and expedite the approval process. The networks also
propose "consistent methods" to identify and verify consumers before
replacing the traditional account number with a token.
Creating the proposal is a "starting point" to "initiate
the conversation across the industry," McCarthy said. Merchants, financial
institutions and other industry players would need to agree to use tokens
instead of traditional account numbers and to be able to route and pass the
token consistently.
"What we're introducing today is comparable to how the
industry came together to develop and use the magnetic stripe, EMV and
NFC [near-field communications] on a global scale," according to a
prepared statement by MasterCard chief emerging payments officer Ed McLaughlin.
During the next several weeks, the framework will be
presented to other industry bodies, including banking and payment associations,
The Clearing House, the PCI Security Standards Council and EMVCo.
"The timeframe for [the standard to become effective]
will be determined by how quickly the industry can come together to develop and
adopt the final global standard. At this point, we're talking about a proposal,
not a final industry standard," McCarthy said. "We expect that the
proposed standard will be managed and evolved by the larger industry through
the coordination of a standards body."