How businesses can integrate token technology into existing payment systems

In this Help Net Security interview, Mark Nelsen, SVP and Global Head of Consumer Product at Visa, discusses the integration of token technology into existing payment systems.

How do businesses integrate tokenization into their existing payment systems, and what challenges might they face during this process?

There are a few ways businesses can integrate tokens. They can work with a payment processor, like Stripe, Adyen and others that implement this technology. Larger businesses that have more sophisticated payments systems can also enable and deploy tokens directly.

Awareness is one of the biggest challenges of tokenization today – especially among smaller businesses. We’re continually working to educate businesses on the benefits of adopting the technology. We know making a change in their operations or adding a new feature can be a big decision, and with the adoption of any new technology there is a learning curve. Ultimately though, it’s proven to add value to their business by reducing fraud, increasing authorization rates and creating better customer payments experiences.

Visa has issued more than 10 billion tokens since 2014. How has the technology evolved over the past decade?

The building blocks of token technology have stayed the same since we launched it in 2014, but it has evolved by opening the doors for new payment use cases – like tap to pay on mobile or enabling better ecommerce checkout solutions. The rapid acceleration of digital commerce over the last few years has dramatically increased the need and use of tokens as more people transact online and want easier and more secure solutions.

Can you discuss the recent innovations in tokenization, such as AI-powered shopping experiences and consumer control over data?

We see tokens as a key driver of innovation that will shape the future of commerce. In fact, last month, we announced several new offerings enabled by tokenization, including:

• Visa data tokens, which can offer a more personalized shopping experience, while giving consumers control over their data. We’re extending our token infrastructure to enable an experience where a merchant can ask a consumer for consent to see their data. If the consumer agrees, Visa will deliver AI-generated insights based on the consumer’s spend data via a secure data token that a merchant can leverage with their real-time recommendation engines, powered by AI. Visa can also share data tokens with the customer’s issuer, so they can see where their data has been shared and revoke access if they choose right in their mobile banking app.
• Visa Payment Passkey Service is a next-gen authentication solution that reduces online identity fraud that has exploded in the last several years. During the online checkout process, Visa can verify a consumer’s identity using their biometrics – like a face or fingerprint scan. Visa passkeys also remove the need to manually enter a 16-digit card number, personal information or disrupt the payment process by sending a one-time code via text to prove it’s you. We’ll be integrating this new technology via our token network over the coming months.

What impact has tokenization had on global markets, particularly regions with higher digital payment adoption rates?

Over the last 10 years, we’ve deployed our token technology to nearly every market across the world and adoption of tokens has been in lockstep with digital acceleration. But we still see a gap in payment approval rates between in-person payments and digital payments – and that gap is higher for markets with less digital adoption.

Tokens are crucial for closing that gap because it enhances security while streamlining the consumer payments experience, which leads to higher conversions for merchants. We saw 40B in incremental sales globally because of our token technology, resulting in an economic uplift for markets that implement it.

Tokenization has been shown to reduce the fraud rate by up to 60%. Can you provide more details on the mechanisms behind this reduction?

Devaluing data is a key way that tokens reduce fraud. Tokenization replaces sensitive cardholder data, such as primary account numbers (PANs), with unique digital identifiers, or tokens. These tokens are used to conduct transactions without exposing actual card details, which helps minimize the effects of data breaches and fraudulent activities.

What are the key regulatory considerations for implementing tokenization in different markets?

Adhering to regulation is always important when implementing any technology. Tokens can be classified differently across different markets, so as we’ve deployed them across 200 markets globally, we’ve worked closely with partners across the ecosystem from technology partners and regulators to ensure compliance.