Over the past year, tokenization has garnered a lot of steam in the payments industry as being a key component to better security and data encryption. This is especially the case given the rash of breaches over the past year, affecting a wide range of businesses. The tokenization process even got some time in the spotlight when Apple announced its Apple Pay initiative, which uses tokenization as a means of encrypting mobile payments.
Tokenization takes charge
Other key players in the payments industry have begun to sing the praises of the technology at the point of sale as well. At the recent Bank of America Merrill Lynch 2014 Banking and Financial Services Conference, Visa CEO Charles Scharf said that tokenization technology may wind up being the single-biggest game changer that has affected the payments industry within the past 15 or 20 years.
“When we first started talking about tokenization publicly, everyone was focused on the security aspects of it,” Scharf explained, as quoted by PYMNTS. “The idea of taking the actual account number out of the flow, common sense is that’s a good thing, especially in the light of the data compromises that we’ve seen.”
Scharf was quick to note that tokenization will play a pivotal role alongside the transition to EMV to bolster security. Many retailers understand that EMV cards are a more secure method of payment compared to traditional magnetic stripe cards, but at the same time, EMV alone would not have prevented many of the breaches that have occurred in the recent months – they would have just limited the damage of these attacks, as EMV cards cannot be duplicated as easily.
At the end of the day, it is critical that the payments industry, as well as the businesses implementing POS solutions, move forward with the adoption of EMV and tokenization. This will help create a safer payments environment while also minimizing the involvement of any outside players. Scharf was quick to note that any government interference in the payments industry could be detrimental.
“When things get into Washington, you’ve got to know that they’re listening, but know what’s going on behind the scenes. When it gets to Washington, that becomes lot of finger pointing at things like that, so when you’re in the room with the door closed, there is a lot of conversation. If we don’t do it as an industry ourselves, the government is going to tell us how to do it and we probably won’t like how they tell us to do it,” Scharf added.
Data breaches are detrimental for everyone involved with processing payments. For the merchant, it can damage brands and result in huge financial losses. For the payment card provider, breaches create a lot of cleanup work to get customers new cards. For the POS system manufacturer, a breach may lead to lost sales opportunities going forward due to the bad publicity. Tokenization can help all parties minimize the chances of these events moving forward.