MasterCard’s announcement last week that it will be integrating its tokenized checkout experience within its MasterPass digital wallet was big news for the payments ecosystem, as it represents the first instance of tokenization in an online environment.
Leveraging the MasterCard Digital Enablement Service (MDES) — which allows issuers and merchants to manage tokenization and digitization for security for every transaction — the tokenized MasterPass wallet gives consumers the freedom to shop more securely online or in-app from any connected device.
Vib Prasad, Group Head of MasterPass Global, tells MPD CEO Karen Webster that the integration was “the next logical step” for MasterPass.
He describes the new service as being in line with what MasterPass has stood for all along: Connecting consumers to their banks, driving toward tokenization and EMV…”and, of course,” Prasad adds, “it’s going to work across every device and every channel."
"If we look to the Internet of Things,” Prasad observes, “with everything becoming payment-enabled, the idea that we’re going to have to support tokens across multiple environments with the relevant domain controls to make sure you can create the experience and limit the risk into any one of those channels, tokenization — within the context of the law — has to happen sooner than later."
Prasad notes that integrating tokenization into MasterPass was, on one hand, challenging — as is any process that involves multiple channels — but at the same time MasterCard’s experience in developing MDES provided the company with the ability to undertake the endeavor.
In a way, says Prasad, the integration “was an extension of what we learned” from MDES.
For issuers to allow consumers to use MasterCard at a physical store, MasterPass in an app, and MasterPass online — and receive the same level of tokenization in each case — does require some nuance; Prasad gives the example that the NFC wire can’t be accessed on an iOS device.
"Being able to provide a tokenized transaction in a consistent way across Android and iOS is more challenging,” he tells Webster. ”We have to be able to take into account the nuances of the individual environments we’re operating in."
Acknowledging that the proliferation of mobile devices makes tokenization “critical” for managing the user’s digital identity, Prasad shares that MasterCard will be starting to do some market tests early next year with the new three-channel (in store, in-app, and online) tokenized solution.
Give the range of merchants — in size and scope — that will be able to use the tokenization-integrated MasterPass, Prasad explains that MasterCard allows flexibility in deployment options.
"It can be completely invisible,” he tells Webster. If it’s the merchant’s preference, MasterCard can pass a PAN rather than passing a token, and nothing else is required on the merchant’s end.
However, should a merchant wish to take advantage of potential new shopping experiences that can be enabled — a restaurant allowing, for example, customers to order food within an app — with the tokenized MasterPass solution, MasterCard can help them facilitate that, as well.
“While there’s more work involved” in the latter case, says Prasad, “it also offers more reward.”
Integrating the new solution can be different from a merchant’s traditional operations, but, he notes, “it’s only as different as you need it to be to differentiate your experience."
In that sense, the technology is additive; Prasad describes that it “layers on another level of security.”
"We will still have the ability to do in-app transactions if a merchant chooses not to tokenize,” he says. “We want to bring them on the journey with us, but we recognize that each of them is at a different point on that journey."
As MasterPass has currently expanded to reach 24 markets and about 150,000 merchants, Prasad shares with Webster with a number of different use cases identified for the service. There’s a taxi company in Singapore for which MasterPass is facilitating in-app payments, similar to an Uber experience; he also references some pay-at-table, split-the-bill restaurant integrations “that [have] been getting a lot of traction."
Webster observes that consumers are really gravitating to the convenience of mobile and online ordering and in-store pick ups for restaurant transactions; but the challenge remains — for some merchants in that space — to keep pace with that demand.
Prasad believes that merchants are going to have to make decisions in that regard based on top-line revenue. If they can justify implementing such a service based on revenue — “getting more people in and out of the store in a busy lunch hour,” for example — “that tells them they can afford to invest."
"When you have these types of experiences that can be transformed,” concludes Prasad, “that’s where a MasterPass really kind of comes to life and pays off — in addition to [providing] the traditional, quicker, faster online shopping experience."