Tokenization has really made a name for itself. Driven by the wide availability of near field communication (NFC)-enabled smartphones, the launch of numerous mobile payments platforms and unprecedented consumer demand, the technology is now cemented as an integral part of the payments processing chain.
Many banks and service providers have chosen to get ahead of the curve and take control of their own tokenization activity to avoid interchange and tokenization fees, increase security, reduce time-to-market and establish a competitive edge over their competitors.
With a variety of token service provider (TSP) platforms on offer, how can service providers get the most bang for their buck?
Here are our top five features to look out for when selecting a TSP platform:
1. Transaction Management Functionality
A transaction management module (TMM) offers enhanced security and is therefore central to all good TSP platforms. The most important feature of a TMM is the ability to perform cryptogram validation. Various types of cryptograms can be generated during a tokenized payment transaction and a TMM identifies, supports and validates them as part of the authorization process.
On top of this, the TMM performs security checks such as domain validation, which identifies whether a tokenized primary account number (PAN) is being used in the correct domain. For example, was it intended for an eCommerce transaction or a mobile NFC payment?
Finally, TMMs can apply risk parameters, such as spending limits and expiration dates, as well as applying fee calculations to define billing rules for tokenization usage. All of these areas serve to strengthen the security of the solution.
Put simply, the issuance and remote management of the payment credentials provided by TSPs must comply with specifications defined by EMVCo and the global payment schemes. It is therefore imperative that, when choosing a TSP solution, it is certified by the payment schemes to provide assurance for your tokenized transactions.
3. Hosted vs. in-House
Be sure to select a TSP solution that offers flexibility and options. You may be keen to take a service in the short term, but it may make better business sense to bring the technology in-house further down the line. Hosting the service with a trusted third-party is an ideal way for banks and service providers to control their own tokenization activity, without the costs associated with in-house implementation. With the right solution, it’s then possible to bring the technology in-house, without disruption, should your business model evolve in the future.
4. Flexibility to Implement with Different Form Factors
Payments come in many different shapes and sizes. They can be secure element (SE)-based, or cloud-based using host card emulation (HCE) technology, and used in either an eCommerce or mCommerce payment environment. To maximize the value of your tokenization activity, look for a TSP that supports this diversity.
5. Scalable and Flexible
With the mobile payments ecosystem advancing rapidly, banks and service providers must be able to adapt quickly. To accelerate time-to-market, service providers should choose a TSP solution based on common standards. This should make it easy to integrate with legacy systems.
It should also offer the ability for additional modular features and services to be added, as and when they are required. These ‘add-ons’ might include a TMM, a trusted service manager (TSM) – for the provisioning of tokens to a mobile device – or a HCE module, for the provisioning of tokens to the cloud. This means that service providers’ tokenization strategies can develop in parallel with their business models.
The development and expansion of the tokenization ecosystem signals an opportunity for banks and other service providers to take advantage of the latest payments innovations. When it comes to choosing a TSP platform, it is important to choose the best in class to maximize this advantage.
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