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Credit, Debit or Digital Token: Your New Payment Choices

[Sunday, December 1st, 2013]

When ringing up a purchase at the register, the question used to be, is that credit or debit? But soon there will be a new option: digital tokens are on the way.

With an increasing number of sales made by digital transaction, there is an increased need for security to protect account numbers. Most receipts show only the last four digits of a cardholder’s account number, but new digital token technology aims to improve upon that by replacing the account number with a “token” that stands in for the customer’s actual account number. This keeps the number secure and prevents it from passing before too many sets of eyes.

Visa, MasterCard and American Express are leading the way with digital token technology, banding together to propose a global standard for digital payment security. Some of their key proposals:

  • Create new data fields to provide detailed transaction information, prevent fraud and expedite approvals
  • Use consistent methods for consumer identification and verification
  • Have a common standard for contactless payments and online transactions

How digital tokens would work

Instead of providing an account number to a merchant, via credit or debit card, the consumer would simply provide the digital token. This token would be used to process, authorize and clear the transaction—every step in the usual credit or debit card process. However, tokens will be limited in how they can be used, unlike account numbers.

If someone gets hold of a credit or debit account number, they can use it to make purchases, get cash advances or find out information about the account balance and activity. Digital tokens are not as vulnerable to fraud.

The process would be seamless for consumers and provide them with greater security and ease of payment. Credit card issuers say the digital token will create a new landscape for digital payments and payment products.

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