Press
TMG white paper explores tokenization for card issuers
DES MOINES, IA (January 29, 2015) — Enrolling a card portfolio for tokenization has benefits far beyond Apple Pay. So writes TMG product managers Brandon Bogler and Brandon Kuehl in a new white paper exploring the implications of tokenization for community financial institutions that issue credit and debit cards.
Whereas EMV chip cards were created to address card fraud in the physical world, tokenization was built to address digital card fraud. It works by replacing vulnerable card data with secure tokens, effectively removing the card data entirely from digital devices and infrastructure.
Credit unions and community banks largely have been introduced to the technology through Apple Pay, Apple’s digital wallet. Tokenized cards are a prerequisite for issuers to take part in Apple Pay.
“Because issuers have to enroll in tokenization before they can enroll in Apple Pay, there exists a bit of a misnomer that tokenization is unique to Apple Pay,” writes Bogler and Kuehl. “In fact, issuers can choose to enable tokenization without participating in Apple Pay at all.”
Bogler and Kuehl go on to explain why issuers will want to do so: “In the near future, tokenization will be a part of much more than Apple Pay, including card-not-present merchants like Amazon, Android wallets and devices like laptops, tablets and wearables.”
Beyond the ability to offer cardholders access to e-commerce merchants that may require tokenized transactions in the future, Bogler and Kuehl expect to see incentives for tokenization coming from the major card brands. “We anticipate Visa, MasterCard and potentially others to take a similar stance on tokenization as they have with EMV, namely with the establishment of liability shifts or similar incentives.”
Sixty percent of TMG’s financial institution clients have committed to Apple Pay enrollment to date. TMG and its strategic partner CO-OP Financial Services were the first credit-union group service providers to take clients live with Apple Pay. TMG has developed a streamlined process for tokenization enrollment to get more credit unions and community banks enrolled quickly.
“Being the first beta of Apple Pay at TMG is part of Dupaco’s continuous effort to anticipate and meet members’ changing financial needs,” said Todd Link, Dupaco Community Credit Union, senior vice president of risk management and remote delivery. “This helps secure Dupaco’s relevance to members, as it maintains the credit union’s stake in the evolution of payments —whatever path it takes. Apple Pay and tokenization are in many ways moving targets, which makes it critical to have a partner like TMG that has kept dialogue open. We will look back on this point in time as having significant impact on the future of our credit union.”
To download the white paper “U.S. Participates in the Global Fight against Card Fraud,” visit themembersgroup.com/tokenization.
About TMG
TMG (The Members Group) is dedicated to creating customized, technology-driven card processing and payment solutions for credit unions and community-based financial institutions across North America. Innovations in fraud management, loyalty programs, alternative payment systems and analytic reporting, and the competitive advantages they create, have helped TMG forge a new standard in offering cutting-edge credit, debit, ATM, prepaid card products and a P2P payment solution. For more information, visit www.themembersgroup.com or twitter.com/tmg.