Others

Mastercard to Revolutionize Online Payments with Tokenization by 2030

Mastercard to eliminate manual card entry in Europe by 2030, aiming for 100% tokenization to reduce $91 billion fraud risk.

By Bill Bullington

6/11, 07:19 EDT
article-main-img

Key Takeaway

  • Mastercard will phase out manual card entry for online payments in Europe by 2030, replacing it with tokenization to enhance security.
  • Tokenization aims to reduce online payment fraud significantly, which is projected to exceed $91 billion by 2028.
  • The initiative includes passkeys and biometric authentication, making online payments as seamless as contactless in-store transactions.

Mastercard's Tokenization Initiative

Mastercard has announced a significant shift in how Europeans will make online payments starting from 2030. The company will no longer require users to manually enter their card numbers when checking out online. Instead, all cards issued on its network in Europe will be tokenized. This means the traditional 16-digit card number will be replaced with a randomly-generated "token." Mastercard has been collaborating with banks, fintechs, merchants, and other partners to phase out manual card entry in favor of a one-click button across all online platforms. This initiative aims to enhance security against fraud attempts and streamline the payment process.

Valerie Nowak, Executive Vice President of Product and Innovation at Mastercard Europe, stated, "In Europe, we have seen tokenization gaining momentum across the ecosystem, the convenience and reduced rates of fraud sell themselves." The company believes that this move will be beneficial for shoppers, retailers, and card issuers alike. Mastercard is also introducing passkeys to replace passwords and enabling biometric authentication for one-click payments at checkout. Cards stored via tokenization can be automatically updated when replaced or renewed, further simplifying the user experience.

Reducing Fraud

Mastercard asserts that 100% tokenization across e-commerce sites will significantly reduce fraud rates. According to Juniper Research, losses from online payment fraud are expected to exceed $91 billion by 2028, totaling more than $362 billion globally over the next five years. Mastercard's adoption of tokenization has been increasing at a rate of 50% each year and currently secures about 25% of all e-commerce transactions globally across its network. The company chose Europe for this rollout due to the continent's history of leading payments innovations, such as contactless payments and online banking.

Nowak emphasized the benefits of tokenization, stating, "We are confident that reaching this vision by 2030 is a win-win-win for shoppers, retailers, and the card issuers alike." The move is expected to make online payments as seamless as contactless payments in-store, allowing consumers to make payments with one click across various devices, including smartwatches, home assistants, and even cars. For instance, Mastercard has partnered with Mercedes-Benz to enable digital payments using a fingerprint sensor in cars at over 3,600 service stations across Germany.

Evolution of Payment Methods

The ways we pay for products and services have undergone significant changes over the decades. From the introduction of credit cards in the 1950s and 1960s to the shift towards online payments with the advent of the internet in the early 2000s, payment methods have continually evolved. Initially, credit card payments involved manual checks against a book of invalid numbers or calls to the issuing bank. This was followed by the use of "zip-zap" machines that imprinted card numbers on carbon paper packets. The 1970s and 1980s saw the advent of magnetic stripes and electronic payment terminals, which were later succeeded by cards with microchips.

Mastercard is betting that its move towards an "embedded" payment system will be as transformative as the adoption of chip and PIN or contactless payments. The company believes that its technology will make online payments as smooth as in-store contactless payments. This shift is expected to be a significant milestone in the evolution of payment methods, making transactions more secure and convenient for consumers.

Management Quotes

  • Valerie Nowak, Executive Vice President, Product and Innovation at Mastercard Europe:

    "In Europe we have seen tokenization gaining momentum across the ecosystem, the convenience and reduced rates of fraud sell themselves. We are confident that reaching this vision by 2030 is a win-win-win for shoppers, retailers and the card issuers alike."