​Visa and MasterCard join forces for payment tokenisation

The payment giants have teamed up to accelerate the adoption of both company's tokenisation offerings, Visa Checkout and MasterPass.
Written by Asha Barbaschow, Contributor

Visa and MasterCard have signed an agreement that will see the payment giants work together in a bid to accelerate the adoption of payment tokens in Visa Checkout and MasterPass.

The "reciprocal tokenisation agreement" allows Visa to request tokenised MasterCard payment credentials from MasterCard for provisioning into Visa Checkout, and MasterCard to request tokenised credentials from Visa for provisioning into MasterPass.

According to the companies, allowing each network to request tokenised payment credentials from the other network will ensure that each network's wallet solutions can continue to stay open to other card brands.

"With many financial institutions issuing products on both networks, we have been working to deliver products that simplify our issuers', our merchants' and our consumers' experience," Visa said in a statement. "Visa Checkout is a great example of one of these experiences -- becoming an industry leader in ecommerce, with more than 1,400 financial institutions, 17 million consumers, and more than 300,000 merchants already on board; but up until now, we have only been able to request tokens in Visa Checkout for Visa-branded cards."

Launched in 2014, the Visa Token Service (VTS) replaces cardholder information, such as account numbers and expiration dates, with a unique digital identifier known as a token that can be used for payment without exposing a cardholder's account information.

Visa opened up its VTS platform to third parties in October, giving the likes of manufacturers, issuers, Internet of Things developers, wallet providers, and merchants the ability to offer Visa's digital payment service on any device.

It then opened its Visa Checkout platform to competing digital wallet services, with Google's Android Pay the first partner signed up for the integration.

Announced at the same time was the signing of agreements between MasterCard and Google, Samsung, and Microsoft that would see the former open up MasterPass for integration with the tech giants' digital wallet services.

Starting early next year, MasterCard card holders that use Android Pay, Samsung Pay, or Microsoft Wallet will be able to use the same tokenised credentials and device authentication methods to complete online transactions at any merchant site that accepts MasterPass.

Similar to Visa's VTS, MasterPass stores all payment information on its platform, including card details from both MasterCard and other payment networks, shipping information, and payment preferences.

Earlier this month, the Reserve Bank of Australia (RBA) published a consultation paper on dual-network debit cards and mobile wallets which discussed concerns about possible restrictions on competition in the mobile wallet sphere, specifically about conduct that may prevent or make it more difficult for both networks on a dual-network debit card to be enabled on a mobile device.

"With the expected strong growth in mobile payments, it is not surprising that there is strong competition between issuers, schemes, and mobile wallet providers in this sphere," the RBA said.

"Mobile wallets represent a technology that allows greater choice by end users. In particular, the physical constraints applied by the size of a traditional wallet or purse -- which made the functionality offered by having multiple networks on a single plastic card desirable -- no longer apply in the mobile world, where a single device has the potential to store as many cards as the consumer wishes to hold."

The paper comes as the Commonwealth Bank of Australia (CBA), Westpac Banking Corporation, the National Australia Bank (NAB), and Bendigo and Adelaide Bank have been seeking regulatory approval to collectively negotiate with third-party mobile providers such as Apple on conditions relating to competition, best practice standards, and efficiency.

The banks want access to the NFC controller in iPhones, as Apple currently does not allow any other entity direct access. The group has been arguing that access would enable the banks to offer their own integrated digital wallets to iPhone customers in competition with Apple's digital wallet without using Apple Pay -- which is what Apple wants to avoid.

Additionally, the banks want the removal of the restriction Apple imposes on banks, preventing them from passing on fees that Apple charges for the use of its digital wallet.

Core to the banks' argument is that the public will benefit if Apple is forced to hand over access to its NFC hardware, highlighting it would increase competition and consumer choice in digital wallets in Australia, increase innovation and investment in digital wallets and other mobile applications using NFC technology, provide greater consumer confidence leading to increased adoption of mobile payment technology in Australia, and provide cost-based benefits for consumers.

However last month, the Australian Competition and Consumer Commission (ACCC) issued a draft determination proposing to deny authorisation for the banking consortium to collectively bargain with Apple.

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