The prospect of wider use of tokenization to reduce or limit instances of fraud has a variety of aspects in its favor. The article provides a solid introduction to the basic concepts and benefits of the use of tokens in the place of actual card data. The ability to retain customer identification for rewards programs is a main consideration.
Also, every time a customer uses his/her credit or debit card at a merchant’s store, the same token number is given to the merchant’s system. This makes it easy for customers to pay with one click for future purchases at a merchant’s store. It also makes it possible to create a buying history on the customer’s account that could be used to start a loyalty program.
Further, as we move to more internet connected appliances, the possibility for said devices to order necessary items (e.g. a dishwasher orders soap for its dispenser). Being able to provide limited purchasing power and venue particular tokenized payment credential will be an important way to protect both the device owner and the retailer. However, tokenization will act as one part in a larger payment security strategy for financial institutions, retailers and consumers.
Overview by Joseph Walent, Senior Analysts, Emerging Technologies at Mercator Advisory Group
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