Next payment revolution will be guaranteed by tokenization, says Visa

Feb 03, 2020, 242 views

One of the promises of the Internet of Things is to allow the kind of frictionless experience that new business models blow towards our convenience. Think of connected refrigerators that, enabled with sensors and connected to the retailer cloud, will be able to inform you that the urgent time has come to buy more milk, eggs or butter and that kind of information and automation does not require more inconvenient trips to the supermarket. After all, with all the ends connected, the refueling will take place at home.

This, of course, is just one example. The Internet of Things, in the wake of 5G's potential, promises to generate a new wave of innovation from the point of view of consumers, retailers and companies. But one of the equations that may concern this new ecosystem concerns security. In this sense, Leandro Garcia, Director of Solutions at Visa do Brasil, says that guaranteeing transactions finds its way into tokenization.

Tokenization came to solve this problem, the Internet of Things world ”, highlights the executive. “When I talk about a connected home and, mainly, in the e-commerce world, I no longer have a physical card. I place a payment credential in each of these locations. My physical card remains in the wallet and when I decide to place it on IoT devices, I generate a token, with 16 new numbers. All other devices work independently ”, he explains.

Tokenization is a relatively recent security technology, it has been around for five years, and its vocation is to offer an extra layer of protection. The technology replaces the traditional card number with a token, a unique string of characters with each purchase.

According to Visa, the next payment revolution - whether through a car, a cell phone or a refrigerator - will have tokenization as one of its protagonists. Visanet survey on the first three months of 2019 points out that in Brazil, the adoption of technology is already a reality. According to the study, the country recorded 20% lower rates of fraud in tokenized transactions compared to the number of frauds found in transactions that do not use the technology. Visa's tokenization solution is called the Visa Token Service. Through it, card data is replaced with a unique digital identifier, used to process payments without exposing sensitive cardholder account data.

If for the final consumer, tokenization promises to deliver the experience without friction, on the retailer's side, it has the potential to leverage revenues. The Visanet study points out that the solution has guaranteed a 30% increase in the authorization rate compared to traditional online transactions. This type of data reinforces the environment necessary to align with the forecasts of Euromonitor International, a market research company, which points out that e-commerce consolidates itself to become the largest global retail channel by the year 2021.

According to the company, more than 410 million tokens have already been issued worldwide by Visa, and more than 100 markets are able to use tokenization. In Brazil, there was an increase of 300% in tokenized transactions in the first half of last year compared to the accumulated in the previous year.

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