Credit card lender American Express has announced that it will no longer be allowing merchants to store their credit card details in stores as it follows Visa in a crackdown on excessive data storage.
Part of this move is about delivering a process called tokenization as digital capabilities make it easier to remove excess data from systems by not capturing it in the first place.
After Visa announced its plans last week, American Express Australia was hot on its heels to offer merchants a similar program.
This led to the company confirming its plans to introduce what it terms “an off-the-shelf retail token gateway” this week. The token has American Express embedded within it.
The credit card industry is currently under a lot of pressure, especially from the Reserve Bank of Australia (RBA), to find a way to put a significant dent in the amount of fraud currently taking place.
At the moment, losses due to credit card fraud are costing close to $500m per year, with a whopping 85% of this happening online. With such a large amount of money lost, the shortfall must come from somewhere, and the central bank is worried that it is becoming unsustainable.
The tokenization process will hopefully be the answer to some of these problems because if regulators do not find a fix, then they will demand that the credit card companies pay for the fraud rather than passing it off to the merchants using their product. If tokenization does not put enough of a stop to the problem, then the industry will head in that direction, so this is somewhat of a last throw of the dice.
Currently there are no official figures to indicate just how many merchants are having to pick up the bill caused by payment facilities, but the National Online Retailers Association of Australia said that it is most of the total.
The tokenization process should help tackle fraud as it swaps the card-specific digits at the end of each number, which are currently identifiable, for a unique token that is the only thing stored. Although this can prove that a transaction took place, those committing card fraud should not be able to match up the equivalence.
American Express’ token gateway, set up by Rambus, is set to allow “merchants to connect to tokenization services from various payment schemes in the payment industry.” It will tag onto existing processes that some merchants have already described as clunky.
According to American Express Australia’s Vice President of Global Consumer Services, Robert Tedesco, the process is good news for merchants who “can offer our card members even more secure payment methods at the time of checkout.’
Tedesco is also hoping to utilize “digital payment capabilities such as Pay with Points and Smart Offers to further build customer loyalty.”.
Rambus Head of Payments and Ticketing Jerome Nadel said that “fraud continues to rise for e-commerce transactions, and we need to give consumers more secure payment methods without compromising usability.”
By implementing “the use of tokens online, merchants and card issuers can increase trust in transactions throughout the ecosystem,” which Nadel said would help “drive higher authorization rates and improved customer conversions.”