Has the challenge of tokenisation vs. omni-channel been solved?

24 September 2015

Earlier this year, we discussed the impact of card scheme tokenisation and the introduction of Token Management Services (TMS). Some of our discussion was based upon the need to understand what tokenisation might offer our customers, and some was based upon our need to understand how to deal with Apple Pay.

Read the article: how tokenisation will impact omni-channel retail

You may recall that we found that most retailers wanted a solution to the challenge of cross-channel returns and customer tracking across channels. However, we discovered that this dream was unlikely to become a reality, because the TMS would be providing a token that looked like a primary account number (PAN) for Apple Pay and other mobile-based payments.

TMS provides format-preserving tokens by channel - cardholder present, cardholder not present and mobile. The provided token will be specific either to the merchant transacting, or to the consumer’s mobile device; essentially, whoever instigates the transaction. Each token has a finite life, which is varied based upon risk.  

At the time, I concluded that although the introduction of TMS would further reduce the opportunity for fraud to take place, it would also stop the omni-channel vision from becoming a reality.

Several months on and EMVCo has put its thinking cap on, and come up with a way to deal with this challenge: payment account reference (PAR). This was defined in EMVCo Draft Specification Bulletin No. 167, released in May this year for comment by the end of June.

It is a pretty comprehensive draft, which covers most use cases for tokenisation and omni-channel. In essence, it relates to an account in a one-to-one relationship. This way, the acquirers and the retailers can know that their customers made a purchase through any channel by tracking the PAR.

There will be no way to use the PAR to initiate a new transaction, so it won’t work for recurring payments, but it can be used to reverse or refund a previous transaction. It will also provide a holistic view of the customer, whereas today you might see one PAN for Apple Pay, another for Samsung Pay, another for chip and PIN and another for ecommerce, depending upon which payment service providers and acquirers you use. This will help with fraud screening and velocity checks too.

There will need to be some agreement by the key stakeholders - Amex, MasterCard, Visa, issuers etc. – and then system changes will need to be implemented, so it might be a couple of years off.

This is a shame in many respects, because it means that retailers who want to keep a common tie to their customers in their CRM systems and loyalty systems will face a period of uncertainty. Perhaps there might even be unhappy customers for a period, because they are not being rewarded for payment using mobile.

We’ll see.

Kevin Burns is head of solution architecture at Vodat International

Has the challenge of tokenisation vs. omni-channel been solved?

Earlier this year, we discussed the impact of card scheme tokenisation and the introduction of Token Management Services (TMS). Some of our discussion was based upon the need to understand what tokenisation might offer our customers, and some was based upon our need to understand how to deal with Apple Pay.

Read the article: how tokenisation will impact omni-channel retail

You may recall that we found that most retailers wanted a solution to the challenge of cross-channel returns and customer tracking across channels. However, we discovered that this dream was unlikely to become a reality, because the TMS would be providing a token that looked like a primary account number (PAN) for Apple Pay and other mobile-based payments.

TMS provides format-preserving tokens by channel - cardholder present, cardholder not present and mobile. The provided token will be specific either to the merchant transacting, or to the consumer’s mobile device; essentially, whoever instigates the transaction. Each token has a finite life, which is varied based upon risk.  

At the time, I concluded that although the introduction of TMS would further reduce the opportunity for fraud to take place, it would also stop the omni-channel vision from becoming a reality.

Several months on and EMVCo has put its thinking cap on, and come up with a way to deal with this challenge: payment account reference (PAR). This was defined in EMVCo Draft Specification Bulletin No. 167, released in May this year for comment by the end of June.

It is a pretty comprehensive draft, which covers most use cases for tokenisation and omni-channel. In essence, it relates to an account in a one-to-one relationship. This way, the acquirers and the retailers can know that their customers made a purchase through any channel by tracking the PAR.

There will be no way to use the PAR to initiate a new transaction, so it won’t work for recurring payments, but it can be used to reverse or refund a previous transaction. It will also provide a holistic view of the customer, whereas today you might see one PAN for Apple Pay, another for Samsung Pay, another for chip and PIN and another for ecommerce, depending upon which payment service providers and acquirers you use. This will help with fraud screening and velocity checks too.

There will need to be some agreement by the key stakeholders - Amex, MasterCard, Visa, issuers etc. – and then system changes will need to be implemented, so it might be a couple of years off.

This is a shame in many respects, because it means that retailers who want to keep a common tie to their customers in their CRM systems and loyalty systems will face a period of uncertainty. Perhaps there might even be unhappy customers for a period, because they are not being rewarded for payment using mobile.

We’ll see.

Kevin Burns is head of solution architecture at Vodat International