MasterCard Wants to Build Future Cities on Tokenization
MasterCard's Craig Vosburg is trying to improve the quality of life in cities around the world.
Hidden underneath broad futuristic topics such as traffic flow and transit efficiency is tokenization, a security technology that is more often associated with e-commerce and mobile wallets.
So, how does tokenization — which replaces sensitive account data with a secure token — relate to the mass transit patterns in megacities like Beijing?
"A lot of what happens in improving cities will revolve around digitizing," said Vosburg, MasterCard's chief product officer, during an interview after his address Skift, a conference that covered travel innovation. "And that means protecting data."
Tokenization is a major tool that MasterCard and Visa are using to stay relevant as financial transactions increasingly move into online venues. As Vosburg envisions it, MasterCard's role in the cities of the future will involve using payments data to inform patterns such as when people use mass transit or the airport, when they check into hotels or use taxis, or any other aspect of their travel habits.
This data, which paints a picture of how and when people navigate cities, can inform government transit strategies. Agencies can address congestion problems, reduce pollution or identify pockets of underbanked citizens by adopting mobile payments, encourage travel at different times and offering other perks to increase financial inclusion, reduce traffic or improve quality of life in other ways.
"You could use payment data to determine when people are using metro systems or train systems, and [incentivize] people to use the systems at other times if they can to reduce congestion," Vosburg said.
Montreal has used a similar strategy by tying a loyalty program to off-peak travel.
"There are ways to use payments data to make cities more livable," Vosburg. "We can see where demand is bumping up against supply, and help make adjustments."
MasterCard would stand to benefit from the strategy, since it would increase card use as well as mobile and other emerging payment technology where MasterCard has invested, such as wearable computing.
"MasterCard feels that it's an opportunity, rather than a pressure," said Gareth Lodge, a senior analyst at Celent. "There is an ecosystem and while others might try to be disruptors, there are key elements that they still rely on, and the card rails currently is one of them. On the other hand, the more companies such as MasterCard embed themselves and their products into the everyday routines we have, and add value to them, the better for all of us."
But that also increases security risk as data flows among more parties, and that is where tokenization comes in, Vosburg said.
"We're going to see a proliferation of technology that's used to make payments, and that's going to create a lot of information that can be useful," Vosburg said. "But if the data is not safe, the strategy falls over. So it comes back to tokenization as being really important."
There are also other security plays that are part of the strategy, such as new authentication techniques, Vosburg said. MasterCard has worked on national ID cards with countries such as Nigeria, and has also explored smartphone "selfie" authentication.
"For example, we're looking at wearable devices that can measure something like a user's heartbeat being used to authenticate a user for payments and other services," Vosburg said.
MasterCard and the other card networks have been pushing tokenization for several years, and the major mobile payment initiatives from Samsung, Google and Apple use tokenization as part of their security posture.
Beyond the "cities of the future," MasterCard is also accumulating modern tokenization deployments. This week is announced a partnership with Berkshire Hathaway Travel Protection to reduce the time it takes to pay travel insurance claims. Tokenization protects the data involved in the claim and the disbursement, enabling faster transactions, according to Vosburg.
MasterCard also enabled corporate card use in all digital wallets, providing tokenization services to commercial credit card issuers.
"This enables corporate T&E expense to be protected by tokenization and used with Apple Pay, Samsung Pay and Android Pay and others," Vosburg said. "It gives the same benefits and functions as consumer payments."