MasterCards card tokenization reaches main street

Friday 6 March 2015 | 14:49 CET | Background

Apple Pay and Samsung Pay run on the same technology, MasterCard Digital Enablement Service (MDES). The card network says it will bring secure mobile payments to a wider audience, shifting the technology away from Secure Element-based services to other platforms. Tokenization of card credentials will bring an added layer of security. Both Apple and Samsung have announced that their respective payment services will be extended from the US into other markets, including Europe. While MDES launched in the U.S. in 2014, it will expand more broadly to other major markets during the course of 2015. Visa and Visa Europe will follow the same path.

Tokens are card numbers that mobile devices use in place of the card number printed on the plastic. MDES validates the transaction, maps from the token back to the payment account number and forwards it to the issuer for authorization. All MasterCard transactions made through Apple Pay and Samsung Pay are ready to use industry-standard EMV-level security, and are protected using standards-based payment tokens. 

Using tokens enables a more secure and a payment service, MasterCard says. The extra layer of security comes from the fact that a token can be locked to a specific device or channel. If the token is somehow compromised, it will be blocked. Tthe consumer experience should also improve, because in the event of a lost card or smartphone, the token or card can be reissued without disrupting the consumer.

MDES supports NFC-contactless payments and Digital Secure Remote Payments (DSRP) a transaction method where a consumer is able to make in-app purchases using a token. In-app payments use the same platform and can be authenticated in the same way.
The Apple iPhone 6/6 Plus and latest iPads use a fingerprint scanner, while the upcoming Apple Watch imprints the signal from the heart rate sensor. Samsung uses a fingerprint scanner on the first two models that support Apple Pay, the Galaxy S6 and S6 Edge.

The U.S. migration to the EMV chip standard is well underway, with industry partners projecting that half of all cards and 47 percent of all merchant terminals will be chip-enabled by the end of the year. This also means that LoopPay’s Magnetic Secure Transmission (MST) as featured on the Galaxy S6 is an interim technology. It cannot be used in Europe and most of its installed base will disappear in the US as well.

HCE in trial phase

MasterCard’s MDES will be extended to support MasterCard Cloud Based Payments, on which HCE services can be built. Host Card Emulation (HCE) and cloud-based software is another way to support both secure contactless and remote payment transactions on Android devices. Projects are currently underway in more than 15 countries, but HCE is further away from commercial launch.

NFC adoption in Europe on the rise

In the last quarter of 2014, (NFC) tap transactions in Europe grew by 174 pct. year on year and tappers increased their usage by more than 20 pct. In the Netherlands, the number of contactless transactions grew from 1.5 million in December 2014 to 3.0 million in January. Seeding the market with contactless cards has paved the way. Dutch banks have issued over 8.2 million NFC compatible cards and the replacement rate of NFC-ready terminals at point-of-sale is high. NFC mobile payment is limited in reach, as only Vodafone Netherlands and Rabobank offer a solution, but Apple and Samsung may change that.

Online Sentiment analysis

At Mobile World Congress, MasterCard today announced the findings from its third annual Mobile Payments Study, developed in partnership with PRIME Research. The study tracked 19.1 million global social media posts across Twitter, Facebook, Instagram, Forums, Weibo (CN), Google+ and YouTube throughout 2014, up from 85,000 posts in 2012.

Overall sentiment around mobile payments continues to improve. In 2014, 94% of global conversations were favorable, compared to 77% last year and 70% in 2012. The most positive conversations centered around innovation, rewards and loyalty and convenience (91% average positive tone).

Overall, 91% of the safety and security conversations in 2014 were favorable, up from 20% in 2012 when it was the most negative topic appearing in the research. Although security conversations were among the most positive in the study, the volume of these conversations was low.

Convenience was the most positive aspect of mobile payments (94% positive sentiment). Consumers were most excited to share specific purchases made with mobile devices, particularly how they could utilize them for everyday purchases.

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