Whether it is EMV, NFC, HCE or TSP, there is certainly no shortage of acronyms within the payments ecosystem. And this is one trend that is here to stay.
The recent release of EMVCo’s updated payment tokenization specification has added yet another into the mix – Payment Account Reference (PAR). But what is a PAR and why has it been introduced?
What is PAR?
According to EMVCo, a PAR is a ‘newly-defined data element that reduces reliance on primary account numbers (PAN) when managing security requirements and delivering value-added services.’ It has been introduced solely to support the process of payment tokenization.
Why has PAR been introduced?
Tokenization reduces the value of stored payment credentials by replacing them with a ‘token’. The token is a different number to the customer’s PAN, but with the same format, and can only be mapped to the original PAN by trusted parties.
Although this increases security, it also presents challenges. Consumers may pay using a payment card, or via any tokens such as the various ‘Smartphone Pay’, card-on-file e-commerce and other platforms, that can be related to that one card. This results in a single PAN being linked to several tokens across different payment instruments and channels. As only the token service provider (TSP) can see the relationship between the original PAN and all of its related tokens, this can make it difficult for other entities down the chain to gain an aggregated view of the transactions performed by the original credential.
As a consequence, their ability to deliver value-added services such as loyalty and couponing, and in some cases manage regulatory requirements or provide transaction risk scoring, is impacted. This is because these functions often rely on the ability to identify transactions at the aggregate PAN level to enable monitoring and analysis of consumer behaviour.
EMVCo asserts that the introduction of PAR addresses this issue as it allows PAN-based and related token-based transactions to be linked together, and enables the payments acceptance community to perform these functions consistently while maintaining security.
What does PAR mean for the payments industry?
The jury is still very much out on the PAR. EMVCo does not mandate the use of its technology, but the individual payments systems may choose to do so. This would trigger an implementation process that is likely to be costly, complex and protracted. The debate raging throughout the industry currently, therefore, is whether the investment is worth it.
Keep an eye out for our upcoming blogs for an in-depth analysis of the impact of PARs on merchants and acquirers, and issuers and processors.