In the last of three blog posts on our pioneering INTERAC TSP offering, we look at the range of applications that tokenization will be used for.
Tokenization – the substitution of a real personal account number (PAN) with a unique, randomly-generated number in order to conduct a digital payment transaction securely – is a technology with clear benefits for point-of-sale transactions. The consumer is able to shop in the confidence that his or her personal financial information is not being shared with the merchant, nor is it being communicated over local networks (NFC, wi-fi, the store’s LAN) that might be monitored by hackers. Likewise, a merchant can feel confident that a customer’s identity has been validated by a financial institution, and that the security and liability burden that comes from collecting actual PANs need not be shouldered.
These benefits, however, are not limited to points of sale. For example, an increasing amount of commerce is being conducted within apps on smart phones. On Facebook, you can order goods directly from a merchant’s page – or from its Instagram feed, or even from its customer service chatbot – and naturally a consumer will want such a process to be as secure as possible. Tokenization allows a consumer to pay for an In-App purchase using their digital wallet and the token it contains, rather than by providing the merchant – and the app itself – with their PAN.
Just around the corner is a new world of Internet-enabled objects – some already familiar to us in the form of web-connected baby monitors, for example. This Internet-of-Things (IoT) brings with it an enormous range of payment possibilities, from cars being able to automatically pay tolls as they pass over a bridge (or to pay for gas once they’ve filled up), to baggage tags authorized to pay luggage fees as they move down a conveyor belt. Such a world implies a much wider distribution of personal payment capabilities than we’ve ever experienced before – and at the same time, a much wider security challenge, as each one of our IoT objects would potentially need to carry our personal financial information in order to execute the transactions we’ve authorized.
Tokenization eliminates this problem for the Internet of Things, just as it does for transactions using a smart phone at the point of sale. Consumers will be reassured to know that their PANs are not being replicated on and communicated by all of the IoT objects they own, and merchants will be reassured that the payment details they are receiving from so many objects have been authenticated, and only have value for the transaction – not beyond it.
Wherever payments are being made digitally between parties that do not participate in the same closed payment network, in fact, there is a valuable security role to be played by tokenization. Which is why Interac TSP may well be securing an ever-larger proportion of your business’s revenues – or that of your clients’ businesses – in the near future.