Why the Mobile Payments Revolution Must Have Tokenization

August 23, 2016         By: Steven Anderson

For those not familiar with the term, tokenization is the practice of essentially distilling a mobile payments transaction, and all the data it contains therein, into a referential token, which can refer back to all the necessary information to conclude a transaction, even though it doesn’t itself contain any of that information.

It’s one of the best ways to protect mobile payment information, and some believe that tokenization is so critical to the mobile payments concept that it can’t reach its full potential without tokenization.

Basically, thanks to the growing number of mobile payments options there are out there—not just in platform, but also in places that accept said payments—there are as a result more potential failure points for security and more points where data can be intercepted, stolen and misused.

While major breaches seem to be on the decline, there are still plenty of examples out there that will give any user pause.

Tokenization works to protect data both in transit—being routed between platforms and agencies—and at rest, where a payment record is being stored for later referral or the like.

Plus, with that data safely stored, there’s a clear value for things like loyalty programs and big data analysis, which are useful for the companies that accept the payments as they can use this data to offer new options.

What’s more, tokenization also offers up other technologies, like host card emulation (HCE), which allows banks to better get involved in the mobile payment arena by allowing banks to effectively use a mobile payment system like a card itself. Coupled with other security measures like dynamic keys and cryptographic features, HCE becomes a major force on Android devices, and since Apple has a good chunk of the iOS market locked down with Apple Pay, there’s a clear advantage to offering more for Android. There’s even an advantage here for the merchant, as it better allows the use of Payment Card Industry (PCI) data security standards (DSS) use. When merchants can put PCI DSS to use without a lot of extra investment, it makes the entire system that much safer as a result.

In the end, tokenization can be an extremely valuable part of the mobile payments world because it addresses one key point: security. With the protection that tokenization can offer, there’s no reason why it wouldn’t be put to work. It circumvents the one big complaint that most people have about mobile payments: security. Tokenization makes mobile payments much safer, and allows banks to get better involved in the action, a development that means some great things ahead.

It’s not a universal fix or a magic bullet, but tokenization can go a long way toward fixing many of the biggest problems that mobile payments runs into. It can even potentially solve the biggest problem of all, and that will likely bring in a lot of new users eager to get in on the convenience factor.