Mastercard Expands Use of Tokenization to Combat Payment Fraud

Mastercard Inc. is intensifying its efforts to eliminate the use of credit card numbers in online transactions, aiming to reduce fraud.

A decade after introducing tokenization technology, which replaces consumers’ card numbers with tokens, the company is now processing 1 billion tokenized transactions weekly, according to Chief Executive Officer Michael Miebach.

It took Mastercard three years to reach its first billion tokenized transactions, highlighting the rapid adoption of the technology.

Transition to Biometric Authentication:

Mastercard plans to expand tokenization by replacing traditional security measures, such as passwords, with biometric data, including fingerprints and facial recognition.

This move is part of a broader initiative within the financial industry to address the growing challenge of online payment fraud, projected to exceed $91 billion by 2028.

Evolution of Security Measures:

Initially, passwords were considered the primary defense against fraud. However, Miebach noted that they have become more vulnerable than a safeguard. Mastercard and Visa Inc. introduced tokenization a decade ago in response to large-scale breaches at retailers like Target Corp. and Best Buy Co., where millions of consumers’ credit card information was compromised. The technology, which replaces card numbers with tokens that only payment networks can unlock, significantly reduced fraud in physical stores.

Focus on E-commerce and Global Partnerships:

As fraudsters shift their focus to e-commerce sites that require manual card entry, Mastercard is adapting its technology to meet new challenges.

The company is partnering with banks and payment providers globally to replace one-time passwords with biometric tokens. Mastercard recently launched this service in India, collaborating with PayU and banks like Axis Bank Ltd.

Miebach emphasized the importance of tokenization in mitigating the risks of data breaches and fraud in the digital economy. Mastercard aims to have all e-commerce transactions in Europe tokenized by the end of the decade, positioning tokenization as a critical tool in the fight against online payment fraud.