If I had asked people what they wanted, they would have said faster horses.
You’ve probably seen this quote (allegedly by Henry Ford) before. It is regularly cited as an example of how true innovation has to be something new; not just a better version of something we already have. In the early 20th century, when horses were the private transportation vehicle of choice, a car was something new.
Credit or debit cards are the existing vehicle of choice for retail payments, with 19 billion card transactions made in 2016 in the UK alone. Card’s are great in the face-to-face retail market for which they were originally designed, but not quite so great for use in the digital economy. Historically, a lot of the efforts made to improve the situation, such as address verification and card security codes have just been about trying to make the horse go faster. There is a need for something new, and there are many possible technologies that could provide it.
One such example is EMV Tokenisation. EMV Tokenisation is the underlying technology that has been used to delivery mobile contactless services such as Apple Pay and Google Pay. Exciting for payment nerds and tech giant fan-boys, maybe, but I’ve got a contactless card already. Aren’t tokens just a means to delivering a faster horse? If tokens were only applicable to contactless payments that could be the case, but Token Services such as Visa’s VTS and Mastercard’s MDES offer much more. Indeed, the likes of Apple and Google already use them for more, providing both in-app and browser based payments, but this is just the tip of the iceberg. The real innovation offered by token isn’t the delivery of mobile wallets, it is the removal of card details from the payments ecosystem.
In a nutshell, EMV tokenisation is designed to end the reliance we all have on the use of card numbers for card payments. Giving merchants the problem of securing card numbers belongs to the old world of horses. Instead digital merchants are given a token. The token cannot be used to derive the card number, and has security and usage controls such that merchants and customers alike no longer even need the card details, and so no longer need to fear a data breach. The card details are protected by the Token Service. Bye-bye PCI compliance, so long identity theft. Tokens are more than just a faster horse. They are an approach to payments designed for the digital age.
That’s why I was pleased to see the announcement from Mastercard that Flipkart have become the first online merchant in the Asia Pacific region to launch on the Mastercard Digital Enablement Service (MDES).
We’re starting to see big online merchant’s worldwide move away from storing card details, and look for smarter alternatives, and if the card schemes get their product propositions right, EMV tokenisation will be the technology that underpins many of those alternatives. I’m sure we will see many similar announcements from all the Token Services over the next year.
I’ve had the privilege of being involved in EMV tokenisation from the early days, working for a number of clients in understanding how to implement the specifications and respond to the opportunities. The likes of Apple Pay and Google Pay have enabled the delivery of the infrastructure, but it is the usage by online merchants, and delivery of new and innovative acceptance approaches that will deliver the real volume. And of course this will open up new opportunities for payment intermediaries to help merchants realise these benefits.
I’m convinced that EMV Tokens aren’t just a faster horse, but will they, like Henry Ford’s Model T, be the most successful car in the market? Anyone following developments in Open Banking driven by PSD2, or other initiatives such as the NPA in the UK will be well aware that other vehicles are definitely available. I’m looking forward to finding out.