Secure Mobile Payments: Staying Top of Wallet With Tokenization


With the launch of Apple Pay™ and changes to other mobile wallets, consumer interest in mobile payments is accelerating. Just as Apple Pay and others solve for ease of use with frictionless mobile payments at the point of sale, tokenization helps ensure those payments are secure – and keeps your financial institution central to the consumer payments experience.

To make sure consumers are using your financial institution's card for mobile payments, make it as easy as possible for consumers to add their cards to apps. Ensuring your cards meet requirements to be used through these services is just as important. In the case of Apple Pay, a card has to have tokenization capabilities to be used through the service.

Tokenization, now the standard for mobile payments security, enhances the security of online and mobile transactions by replacing the traditional payment card account number (PAN) with a unique string of digital numbers, or token, so that sensitive account information is never shared. Apple Pay is the first use case of tokenization, but others are following.

Many financial institutions have taken a wait-and-see approach to implementing mobile payments, including tokenization capabilities. However, several factors are coming together that signal a tipping point in mobile payments.

Consumer adoption rates are growing steadily as consumers become accustomed to making purchases with their smartphone. According to Javelin Strategy & Research, half of consumers who have made a purchase with a mobile phone in the last year now buy physical goods over the channel. Millennials are driving much of this behavior; a 2015 study by Raddon found nearly two-thirds of consumers who had made a mobile payment were millennials. At the same time, the number of merchants and financial institutions accepting mobile payments is growing, now standing at one million U.S. merchants and more than 400 banks and credit unions.

Consumer adoption rates are growing steadily

The scope of tokenization is also expanding. In its first use case, tokenization was available for point-of-sale and in-app purchases only. Tokenization will soon expand to include card-on-file or e-commerce transactions. When tokenization is paired with EMV capabilities, it makes for a bundled offering that helps to mitigate card-present and card-not-present fraud. This expansion opens up entirely new mobile payments opportunities in a secure, tokenized environment.

Perhaps most importantly, other wallet providers are joining Apple Pay to adopt tokenization for mobile payments security. Consumers using Android phones – 51 percent of the market – will soon be able to make mobile payments with their mobile device through Android Pay.

As momentum builds, security will become top of mind for consumers, who increasingly demand the convenience of mobile payments and, at the same time, the knowledge that their payment transactions are safe and secure. The busiest shopping season of the year is quickly approaching, which will likely lead to attempted attacks on data. If there's a data breach involving tokenized transactions, criminals will likely only get useless information. Tokenization, especially when combined with EMV-enabled cards, offers consumers enhanced risk protection and a potentially safer shopping experience.

To keep your financial institution visible to customers and retain a revenue stream from the interchange, ensure your card is a consumer's card of choice for mobile wallets and apps throughout these coming developments. The good news? Consumers continue to trust their bank or credit union to facilitate new and emerging ways to pay. According to Mercator Advisory Group, 45 percent of credit card holders, especially the young and mobile-enabled, most often use a card issued by their primary financial institution.

As consumers warm up to a new way to pay, position your financial institution to leverage this mobile payment method to retain and attract customers, and enhance adoption of mobile services and the consumer experience. To rule the wallet, be the card that consumers can use securely anywhere, any time and any way they want to pay.

Interested in learning more about mobile payments and tokenization? Join us at Fiserv Forum 2015, which features sessions dedicated to payments.

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