MasterCard and American Express announced on Tuesday a proposed global standard designed to enhance the security of digital payments and to simplify the consumer shopping experience.
August data from the U.S. Census Bureau showed that approximately six percent of all retail sales are digital—a 200 percent increase since the first quarter of 2004.
The proposed standard would replace the traditional account number with a digital “token” for online and mobile transactions, thereby eliminating the need for the consumer to input actual account numbers to provide an additional layer of security.
Additionally, the proposed standard would be based on existing industry standards and could potentially include new data fields to provide greater transactional information, verification methods and a standard to simplify the process for merchants.
“This continued transition from plastic cards to digital is all about providing consumers with the ability to easily and safely make a purchase,” MasterCard Emerging Payments CEO Ed McLaughlin said. “They would no longer need to store their actual card account number when shopping online or with a smart device; the token would serve as that stand-in. This proposed global standard builds on our track record of working across the industry to deliver safe and secure payment products. What we’re introducing today is comparable to how the industry came together to develop and use the magnetic stripe, EMV and NFC on a global scale.”
After a standard is agreed upon and implemented, merchants and issuers could request a token so that when the accountholder initiates a digital or mobile transaction, the token would be used in the process to clear and settle the transaction the same way traditional card payments are processed.
“By working together to form a common global standard for online and mobile shopping, we will be able to provide enhanced security, interoperability and consistency for all participants within the digital payments ecosystem,” Mike Matan, the head of global network business at AmEx, said. “In addition, we will be able to drive the rapid adoption and expansion of digital payments, delivering innovative new products and services that will allow consumers to realize the full potential of digital commerce in today’s world.”