Digital tokens refer to an electronic payment system that uses electronic tokens rather than e-cash or e-cheques. These tokens are usually created by the bank or financial institutions.
The three companies are confident that going digital will improve the security of their online transactions. By using a digital token, users wouldn’t need to key in their account numbers for expenses and bills anymore, so that gives account holders better protection.
MasterCard’s’ Chief Emerging Payments Officer, Ed McLaughlin said that "This continued transition from plastic cards to digital is all about providing consumers with the ability to easily and safely make a purchase; the token would serve as that stand-in."
Here are the interesting highlights of the proposed system:
- It will let merchants, digital wallet providers, and issuers request a token that can be used to process, authorise, and settle payments for every mobile and online transaction of all account holders. The account number will no longer need to be mentioned, keeping information secure.
- Digital tokens will be restricted to specific merchants, devices, transactions or category of transactions to protect against hacking.
- To keep it consistent worldwide, the standard used to generate the tokens will only be based on “existing industry standards,” making it available to all market participants and networks.
- Tokens will also complement so-called EMV-chip technology, a standard in Europe and much of the rest of the world. EMV stands for Europay, MasterCard and Visa. EMV-chip technology is a standard that ensures the security and global interoperability of chip-based payment cards.
If successful, the use of digital tokens is expected to boost high standards for digital payments. Banks, credit card companies, and online companies worldwide are willing to go forward with the digital token technology.
Thus, Visa, MasterCard and American Express’ bid to improve global e-commerce security via digital tokens is seen as an exciting digital breakthrough.
Stakeholders, partners, and independent industry bodies will be all eyes on digital tokens once the system is offered for market use.
In the coming weeks, these three top names in credit banking are expected to unveil more details that involve the use and distribution of the digital token system.
If the concept takes, it will most likely follow on the success of BitCoin and change the way most people use and manage their money online.
The article is contributed by Israel from Money Hero, the leading financial guide website in Hong Kong. The guide presents up-to-date and unbiased information about credit cards, loans, insurance, broadband and mobile plans, and deposit accounts.
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