DES MOINES, Iowa (4/25/14)--A new white paper from The Members Group hails payment tokens, or tokenization, as the solution with the greatest potential to slow the growth of card-not-present (CNP) fraud in the U.S.
CNP fraud accounts for 16% of U.S. card fraud, which resulted in more than $5.3 billion in losses in 2013, according to the paper, "What Card Issuers Need to Know About Card-Not-Present-Fraud." Much of the CNP fraud growth is fueled by consumer comfort with online transactions. By 2017, U.S. consumers are expected to spend more than $430 billion on e-commerce transactions.
Tokenization replaces card account data with a single, secure token. The token has zero value for a fraudster because it would have to be decrypted, and the only entities capable of doing so are the major card networks.
Today, card data, such as the primary account number (PAN), is static. As soon as a fraudster has obtained it, the data can be used multiple times for unauthorized purposes. Worse, merchants are storing vulnerable data insecurely. Tokenization replaces that PAN data with a unique token, and storage of cardholder data is limited to the tokenization system. This removes much of the burden from merchants, who are increasingly under attack from data-hungry hackers.
Among the most discussed consumer-facing solutions to CNP fraud is a Europay-MasterCard-Visa (EMV) card reader that consumers would use to authenticate their cards online.
Tokenization and EMV are similar in that they both use dynamic data to prevent duplication. Unlike EMV, however, tokenization is a technology that is nearly invisible to the cardholder. Cardholders only become aware of the security measures when they have been victimized or when a suspicious transaction has been flagged.
Although tokenization is mostly theoretical today, the development of standards is under way. Last month, EMVco, a joint-entity owned by several card brands, released its technical document for implementing tokenization in online or mobile environments. EMVco has said global interoperability of a tokenization standard is its goal. MasterCard, Visa and American Express have also announced a joint collaboration to move the standard forward.
To download the white paper, use the link.