IA “FACT” already wrote about the advantages and disadvantages of tokenization and the prospects of tokenization of assets in the Ukrainian banking sector.
Currently, financial institutions ready to introduce this modern technology have joined Mastercard The company plans to switch to tokenization technology to increase payment security and reduce the risk of information leakage. Tokenization replaces the credit card number with a unique “token” that is stored on the cardholder’s device or on the merchant’s website.
Mastercard chose a tokenization strategy for several reasons. First, tokenization replaces real card numbers with unique tokens that cannot be used outside of a specific transaction. This significantly reduces the risk of fraud and data leakage.
Second, tokens can be used for various types of payments, including mobile and online transactions, making the payment process more convenient for users. Third, the use of technology helps increase customer confidence in payment systems because they know their data is secure.
Finally, tokenization is part of Mastercard’s overall strategy to introduce new technologies to improve financial services and support financial innovation.
How it works
Your 16-digit card number is replaced by another number – a token – which is used for transactions. The token does not contain any real information about your card, so even if it is intercepted, criminals cannot use it to commit fraud. Each transaction is confirmed with a unique code (cryptogram), which adds another layer of security.
How you can protect your data outside of online payments
Hence, tokenization helps protect the user’s payment details during online transactions. But how do you protect your data outside of online payments?
Secure payment methods should be used. For example, Apple Pay or Google Pay, which also use tokenization to protect your data. You should regularly check your bank statements in order to detect suspicious transactions in time.
A classic recommendation is to use two-factor authentication as an extra layer of protection for your online accounts. Do not store card data on unprotected devices. You should be more careful with phishing: do not open suspicious e-mails or links that may be an attempt to steal your data.
What other companies use tokenization
Tokenization is actively used by companies in various industries to increase the security and convenience of payments. Among them are banks and financial institutions. The largest financial institutions – Mastercard, Citi, JPMorgan, US Bancorp, Wells Fargo and Visa, – testing the technology shared ledger for tokenized assets and how these technologies can create more efficient, secure and accessible financial services.
For example, Mastercard and Visa are actively exploring the possibilities of using blockchain technology to improve the security and efficiency of transactions. Citi and JPMorgan are also working to implement tokenization of assets to reduce risks and increase transparency of financial transactions. These technologies can significantly improve financial services by enabling faster and cheaper transactions, reducing fraud risks and increasing the overall security of financial systems.
Major retailers – Walmart and Amazon – use tokenization to protect their customers’ data during online shopping. Healthcare institutions use tokenization to protect personal patient data, such as medical records and insurance information.
Insurance companies use tokenization to protect their customers’ confidential information.
Finally, e-commerce platforms like Shopify use tokenization to secure payments. The technology is gaining popularity due to its ability to provide a high level of security and reduce the risks of information leakage.
In addition, it is assumed that in the next ten years the world economy may switch to tokenized currencies, which will radically change the global financial landscape. Tokenization of currencies involves the use of digital assets representing a certain value that can be exchanged for goods and services.
Why not all companies use tokenization
There are several reasons why other companies may not implement tokenization. Tokenization requires significant investment in new technologies and infrastructure. Not all companies are ready to allocate the necessary resources. In addition, integrating tokenization with existing systems can be complex and require a significant effort on the part of IT departments.
Also, different countries may have different regulatory requirements that affect the speed of introduction of new technologies. At the same time, some companies can be more conservative in their approach and take their time to introduce new technologies until they see their effectiveness on the example of others. Each company has its own priorities and strategic goals. Tokenization may not be at the top of the priority list for some companies.
Mastercard, as one of the leaders in the financial industry, has the resources and motivation to implement innovative technologies that help them stay competitive and provide a high level of security for their customers.
Tokenization is already actively used and secures about 25% of all online transactions in the Mastercard network worldwide. The international payment system plans to complete the process of tokenization of bank cards in Europe by 2030. This means that cardholders will no longer need to enter their 16-digit card number when making online transactions, as these will be replaced by generated keys.
Tatyana Morarash
