The world’s largest card network commercially debuted their Visa Token Service in October, 2014 coinciding with the launch of Apple Pay. The service provisions issuers with a token that can be used in place of the card’s primary account number. The token is then transmitted to merchants via Apple Pay for processing for both in-store and in-app purchases. In February Visa announced plans to expand their token service beyond use in Apple Pay to all Visa Checkout transactions, as well as for online transactions with larger, participating merchants that are completed when using a Visa card directly.
One of the benefits Apple, card issuers and others have touted about Apple Pay is increased security, more specifically the use of tokens rather than primary account numbers (PANs). The token is transmitted to merchants along with a one-time use code to process a transaction and the merchant never receives, transmits or stores the 16-digit credit card number, thus reducing their exposure should they suffer a data breach. When a consumer snaps a picture of their payment card to load it into Passbook and use with Apple Pay the information is sent to a token service provider who provisions the a token that is then stored on the device and provided for payments. When a consumer adds a Visa card to Passbook and Apple Pay, it is the Visa Token Service (VTS) that provides this service.
While Visa launched this service along with Apple Pay they have aspirations to bring tokenization and VTS to many more transactions, including those made with other mobile wallets, Visa Checkout and transactions made online using Visa cards directly. While many issuers are already using VTS to ensure the use of their cards with Apple Pay Visa has announced that more financial institutions will begin deploying VTS in support of their mobile payment services and applications not just in the United States, but also across Latin America and Asia-Pacific. The card network claims that more than 500 financial institutions have started to implement the service as it expands to more payment environments.
The implication of this announcement is that many more mobile wallets and payment services may start using VTS in the not-too-distant future. Tokenization provides greater data security and Visa does not want to limit these benefits just to Apple Pay. In fact, Visa is already in the process of improving their Visa Checkout e-wallet with plans to tokenize transactions initiated with this payment service. Visa checkout can be used in traditional eCommerce as well as mCommerce transactions completed online, and updated tokenization technology is expected to be implemented by this spring.
In addition to these efforts, Visa also expects larger eCommerce merchants to deploy VTS. Visa is already in talks with major online merchants to make tokenization updates to stored credit card data. This is part of Visa’s larger goal to replace credit card information that can be reused anywhere (the PAN, expiration date, etc.) with tokens, and bind these tokens to a particular merchant. Visa CEO Charlie Scharf elaborated on the significance of tokens saying that they represent “one of the most innovative and promising technologies we’ve seen in decades.”
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