Visa Takes Tokens Online

Later today, Visa CEO Charlie Scharf will take the stage at Stanford University to explain the next evolution of fighting cyber-criminals, making the data they steal totally useless.

As part of the White House Cybersecurity Summit, Shcarf will announce the “tokenization” of all data for online transactions. Visa’s announcement is one of many anticipated out of the private sector at today’s summit – Visa’s cheif competitor MasterCard will be announcing a $20 million investment in cybersecurity tech.

The tokenized upgrade to Visa’s online payment service, Visa Checkout, will be fully updated with the token tech by spring of this year, according to Jim McCarthy Visa’s global head of innovation and strategic partnerships

The power of a token is in switching out valuable information – the real 16 digit card number – for a meaningless substitute – a one-use number called a token.  As stolen card number can be reused indefinitely (until the theft is noted), a stolen token on the other hand is valueless because analytics can detect subsequent use and head-off a fraudulent payment

But Visa’s goals are bigger than what they are announcing today. Ultimately the plan to swap out  the card data stored by e-commerce retailers with tokens, and go the extra step of binding those tokens to a particular merchant. In other words,  tokenized credit card data stolen from Overstock couldn’t be used to buy something on Amazon.

Visa is in talks to make tokenization happen with several large online merchants via updates to stored credit card data.  McCarthy told Politico that the company expects to announce those updates later this year. This will not entail changes for consumers,

Visa is not alone in its latent love of the token.  U.S. banks have been testing tokenization technology on payment apps loaded on mobile phone.  Moreover,  the idea of  tokenizing all  the credit card numbers stored on physical payment card chips, which are set to become more ubiquitous this year it is becoming increasingly popular within the industry.

“That’s a ‘nice-to-have’ at this point,” said McCarthy, since chip-enabled payment cards will greatly reduce in-person credit fraud due to the immense cost of counterfeiting the chip.