Interac, the Canadian debit network, has frequently spearheaded contactless payments innovation. It is now taking steps to extend this tradition to mobile commerce.
The network is turning to tokens, or temporary numbers that replace account data, to support payments on a variety of mobile devices or electronic wallets. It developed the Interac Token Service with partners including Bell ID, IBM and Everlink, a payments technology company.
By adapting technologies primarily used for contactless payments, Interac is able to delve deeper into the world of digital commerce and build a foundation for in-app purchases.
Despite Interac's practice of enabling contactless card and smartphone payments for years directly with merchants, it has generally managed e-commerce and mobile transactions by routing consumers first through their bank accounts.
By adding tokens, Interac can speed the e-commerce payments experience, and increase its reach to mobile devices, said Avinash Chidambaram, vice president of product and platform development at Interac.
"Today, we can put the users’ credentials on the mobile phone, and this will start evolving to other types of payments, either in-app or online transactions," Chidambaram said.
Interac's earlier efforts in contactless mobile payments include collaborations with PayPal, CIBC and Moneris in the MaRS Discovery district, which draws technology, business and academic talent from across Canada to develop and spot new innovation. Interac has also worked with Everlink on a contactless wristband and on an on/off switch for debit cards.
This week's move to expand digital payments security comes as Interac manages the expansion of cross-channel shopping. The pressure is on payment companies, issuers and merchants to provide a shopping and paying experience that is seamless across channels, or omnichannel. Interac hopes to enable in-app payments for an item spotted in a store, as well as the reverse.
"I think that many merchants are thinking about that," Chidambaram said. "How to do stuff like make a purchase at home and pick up the item at a store."
Tokenization has become a substantial part of Visa and MasterCard's strategy for digital payments, including projects such as adding payments to wearable computing and expanding financial inclusion through mobile money programs in developing markets. Apple Pay also uses tokenization as part of its security mix, as do many other mobile payment initiatives.
The move to tokens can aid in protecting consumer data from merchant breaches.
"Issuers now have to proceed as if it's not a matter of 'if,' but rather 'when' its cardholders' data will be involved with a breach," said Julie Conroy, a research director at Aite Group. "And with a token, the criminals get only the token, meaning they can't use it to transact and there is no adverse impact to the cardholder or issuer."
But there is a downside to tokenization, Conroy said. "It can actually erode the opportunity for cross-channel data analysis for marketing or fraud prevention purposes," she said, adding EMVCo is taking steps to address that issue though it may take years to implement because of the complex messaging involved.