Tokens Have No Value Outside their Systems but Are Worth Everything in the Fight Against Fraud

Maria Schuld
Group Executive – Financial Services Group
Posted on October 5, 2017

Tokenization with Bitcoin Currency

If you’ve ever used a subway token in New York City, you know how valuable they were – and how completely devoid of value they were everywhere else. The same could be said of digital tokenization. The information it transmits is worthless at face value, but its ability to transmit very sensitive data in a way that’s useless to criminals gives it incredible value for cardholders, issuers, and merchants.

The Value of Tokens in the Fight on Fraud

A recent article by Dan Peacock clearly explains tokenization and why it’s now the best solution to keep cardholders’ data safe. It’s simple, tokenization doesn’t create friction in the system – e.g., drive-up abandonment at checkout – and it’s a strong driver of safety for digital payments. Since tokens have no value outside of the ecosystem they occupy, they have no value to fraudsters who steal them.

Tokens provide security for cardholders. However, merchants and issuers have even more to gain from the reduction of inherent and residual risks associated with holding cardholder data, not to mention the costs of protecting that data and their reputations.

Creating a New World

As with any new model, tokenization ushers in some questions requiring resolution. For example, how will payment processors deal with the potential challenge of receiving multiple token conventions from multiple clients, each client having its own way of tokenizing data? How will merchants and financial institutions align their tokenization strategies with their payment processors’ strategies to create cost-effective and efficient solutions?

With the introduction of EMV, we anticipated that fraud would shift to card-not-present (CNP) transactions, and it did. In the United States, NACHA has already expressed concerns that tokenization will drive card fraud to the Automated Clearinghouse (ACH) and has initiated discussions on a tokenization strategy for the ACH Network. Questions they are pondering: What happens to routing transit account numbers when tokens are introduced? What number – the routing number or the account number or both – become tokenized?

Tokenization is a powerful tool for gaining ground on fraudsters and translates to better protection for your customers and, in turn, your company. It can lower your risk profile and the extensive costs associated with protecting your customer’s information.

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Maria Schuld
Group Executive – Financial Services Group

With over 20 years of experience in the financial and payments industry, Maria is the Group Executive for debit, credit, fraud operations and business management. Previously, she was a senior management team member for Metavante before its 2009 acquisition by FIS. Other areas of expertise include implementation management, account management, and professional services management.