Visa, which just revamped its digital payment system, will introduce secure "tokens" in September to replace the 16-digit account number for online payments.
These plans, which are part of a broader initiative called Visa Digital Solutions, also advance a collaborative effort with MasterCard and American Express to use tokens in digital payments.
"A card on file can be replaced with a token that is associated with a merchant or a phone or a [digital] wallet, and that can be done without the merchants or retailers replacing any of the existing account infrastructure," said Jim McCarthy, Visa's senior vice president of innovation and strategic partnerships.
Many card issuers and consumers are concerned about e-commerce security in the wake of retailer data breaches and in anticipation of the U.S. adoption of the EMV-chip card standard, which improves security at the point of sale but will likely result in fraud shifting to the Web.
"I think there is a pent up demand [for token solutions]," McCarthy said.
The three card networks also proposed using data fields to provide richer information about the transaction. This information could help fraud detection and expedite the approval process. The networks are also working to establish a common standard to simplify the process for merchants to offer contactless, online or other digital transactions.
"For consumers it will feel like the same experience but you won't have the security risk of a static account number," McCarthy said, adding the tokens are 16 digits to reduce the adjustment required by merchants and other stakeholders.
Visa's tokens can be stored directly in mobile devices, online e-commerce applications and cloud-delivered mobile apps. The tokens can be limited for use with specific merchants, devices or categories of spending. The tokens will also be based on existing International Organization for Standardization (ISO) standards for payment security, and as such can be processed and routed by merchants, acquirers and issuers similar to how they handle card payments
Visa has also reportedly signed on with Apple to support an upcoming Apple digital wallet, according to the tech news sites 9to5mac and The Information. Visa did not provide a response to these reports by deadline.
MasterCard and American Express did not return requests for comment by deadline.
"Visa's Digital Solutions, along with its support for a remote secure element in the cloud, will establish a secure standard early enough in the evolution of mobile payments to ensure a smooth integration," says Nathalie Reinelt, an analyst at Aite Group.
While the move probably won't attract consumers to mobile paymentssince consumers are more concerned with loyalty and rewardsit will be a significant incentive for merchants to enable mobile payments, Reinelt said.
"Tokenization obfuscates cardholder data and can protect merchants and their consumers in the event of a breach," Reinelt said. "This is likely also welcomed news for the issuers, who have to reissue cards every time a merchant platform is compromised. Tokenization will eliminate the need for reissuance, since Visa will only has to generate a new token."
Visa Digital Solutions will also support future products aimed at expanding payments across Internet-connected devices and wearables.
Other components of the Digital Solutions initiative include a software development kit that's designed to make it easier for merchants, financial institutions and application developers to embed Visa's payWave contactless payments technology into mobile apps. Issuers can host account information in the cloud or on a chip on the mobile device.
Visa has also published a specification for presenting account information in the form of a Quick Response (QR) code, giving retailers the option to accept Visa payments by scanning the code on a smartphone screen. Visa Checkout, a mobile payment service that replaces the V.me digital wallet is also part of the initiative.