Consumers are ditching their physical wallets and purses in favour of the more streamlined alternative of mobile wallets and paytech. Smartphones facilitate a variety of functions for consumers when they are out and about.
The coronavirus pandemic has also made people increasingly conscious of the need to make payments in an entirely contactless way, without having to use card terminals that have been touched by dozens of other people.
Therefore, organisations that provide payment cards to customers need to ensure they are on top of their tokenisation strategy, in order to satisfy the demands of their customers. However, it isn’t a straightforward path. There are a number of complex, time-consuming tasks involved and approvals that need to be sought. Navigating all of these processes requires an experienced guide.
In this guest article for The Fintech Times, Louise Ayala-McCarthy examines what businesses that want to add tokenisation to their card programmes need to consider and the best approach to take.
Ayala-McCarthy is the director of project delivery at Transact Payments, a provider of European BIN sponsorship and modular payment, debit and prepaid services. The company is licensed by UK and European e-money institutions and principal members of both Mastercard and Visa.
The pace of change in the financial services market has increased rapidly in recent years, fuelled by a mix of digitisation, regulatory changes and consumer demand. Some changes happen more quickly than others, but financial service providers that don’t keep up risk falling out of favour with customers very quickly.
One such area of change is tokenisation. With people much more reluctant to use physical cash and card terminals due to their concerns about Covid-19, the use of digital wallets is growing rapidly. Any card provider that doesn’t give consumers the option of making payments digitally runs the risk of becoming yesterday’s news.
Tokenisation offers consumers greater convenience
When we talk about ‘tokenisation’, we are referring to the process of replacing a consumer’s debit or credit card number with a digital token that can live inside a digital wallet. Effectively it means that rather than a consumer having to use a physical, plastic card to make payments they can make the payment from their mobile phone instead. When a payment is made, rather than the customer’s card details or account number being used to authorise it, the digital token is shared. So as well as being an easier way to pay for the consumer, it’s also more secure.
We’ve been able to make payments in this way since 2015 so it’s not exactly brand new, but it isn’t exactly industry standard yet. You may have noticed that not every payment card you use is yet supported by Apple Pay, Google Pay or Samsung Pay. This is because actually enabling tokenisation isn’t straightforward — in fact, many financial institutions and service providers that I have spoken to have been surprised by just how resource-hungry and time-consuming the process of getting their cards into digital wallets has been.
However, it is absolutely necessary for financial service providers to tokenise if they don’t want to become obsolete. In order to make this happen, there are a number of things they need to take into account when building their tokenisation strategy.
BIN sponsorship and pay platforms
One of the first things that need to be considered is BIN sponsorship. If a financial service provider doesn’t already have its own BIN, then it will need to implement a new bin and set the ranges live, before the project can begin. However, before starting the project it is imperative they get the approval of the pay platforms that they want to use — Apple Pay, Google Pay, Samsung Pay and so on. Without this approval, all of the hard work and investment could come to nothing as a rejection means the provider would not be able to progress with enabling it.
Getting the approval of the pay platforms requires that the financial services provider meets a number of criteria. These platforms take their reputation very seriously and will only agree to work with suitable entities. The provider will also need to agree to various terms regarding exclusivity periods and submit information to the platform when requested — failing to do so could add weeks to the project.
Additionally, there are certain requirements around marketing communications, which will involve issuing press releases and social media posts that adhere to guidelines set by the platform.
Tokenisation takes time
The whole process is likely to take at least seven or eight months. It will also come at a significant cost, depending on the payment platforms included and the number of territories involved. The timescale might seem relatively short, but it will pay off to embrace longer-term thinking when it comes to tokenisation.
While some might think focusing on just one payment platform — for example Apple Pay — might be a good start, this means they will just need to run another separate project from scratch when they realise they need to be on Google Pay and Samsung Pay as well.
Managing the process will also come with its own internal costs and considerations, so financial service providers would be well advised to seek outside help. Ideally, they need to look for partners who already deal with the pay platforms and card schemes on a regular basis, so they can leverage this relationship. A partner that has experience in helping other businesses to tokenise would also be beneficial, as they will be aware of the challenges and pitfalls.
Effective project management is a must, and those that have been along this path before will have a great deal of expertise to share.
People are increasingly leaving their wallets and purses at home when they leave the house, often relying entirely on just one item — their smartphone — to perform a variety of functions for them when they are out and about. While plastic payment cards may not die out entirely, people would simply rather not use them anymore.
Organisations that provide payment cards to customers need to ensure they are on top of their tokenisation strategy, in order to satisfy the demands of their customers. However, it isn’t a straightforward route. There are a number of complex, time-consuming tasks involved and approvals that need to be sought. Navigating all of these processes requires an experienced guide.
By finding a partner that can help them manage their tokenisation projects and introduce them to the pay platforms and card schemes, they can put themselves on the road to success.
