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Payment Networks 2.0: The Battle for Tokenization

  • ID: 3022177
  • Report
  • Region: Global
  • 40 Pages
  • Mercator Advisory Group
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New Research Defines the Many Paths Now Available to Payments Providers Based on Implementation of Tokens


  • Adaptive Path
  • Bank of America
  • Dunkin’ Donuts
  • mFoundry
  • PNC
  • TSYS
  • MORE
New Report Offers Implementation Details Of Tokenization And Insight Into How Tokens Will Impact The Future Payments Landscape

The research report 'Payment Networks 2.0: The Battle for Tokenization' provides a deep dive into how network tokenization operates, starting with the EMVCo specification and a review of the Apple Pay implementation. It provides clarity regarding the technical challenges associated with implementing host card emulation (HCE) and identifies how tokenization will impact the payments value chain and how Apple Pay will impact Google, PayPal, MCX, and Softcard.
“Expanding beyond the tightly controlled Apple Pay environment into the Wild West of the Android environment will take time,” said Tim Sloane, author of report. “Tokenization will change the payments industry in interesting ways. The networks have clearly carved out a new business model for themselves, and the implementation of tokens will enable payment providers to enter adjacent markets, such as identity management and loyalty management, if they wish. Indeed tokens offer so many growth paths that determining which path any individual payment provider will follow will likely consume corporate strategic thinking for the next few years.”

Highlights of the report include:

- Discussion of consumer behavior driving the growth of mobile payments and aspects of it that provide merchants an advantage if the networks fail to adjust their business models
- Analysis of EMVCo’s failure to deliver specifications sufficient to resolve debit routing and ATM usage in its tokenization specification
- A detailed process flow for implementing tokenization for Apple Pay and a process flow illustrating the challenges of managing a more complex environment such as that of HCE
- A review of banks’ responses to Apple Pay so far and recommendations for how banks should be responding to Apple Pay and tokenization going forward
- A competitive analysis of how Apple Pay impacts major payment network competitors
- A history of the long and winding road that finally brought tokens into the network world
- How MasterCard and Visa have approached mobile payments over time and how they will monetize tokenization using new business units for rolling out token-based services
- A deep dive into the EMVCo Tokenisation Specification identifying key components that will have a major impact on the roll-out of mobile payments going forward, including new payment functions with merchant, time, and spend restrictions and how these new capabilities might be tied to the Internet of Things and beacons
- Why tokenization as currently implemented threatens the business models of EFT network providers and issuing processors, including a chart showing which business functions will be adopted by the networks, challenging the existing business models of issuing processors
- The implications of tokenization on networks that have yet to announce how they will respond, including American Express, Discover, and PayPal
- A discussion of why future standards are required if payments innovation is to leverage consumer contextual information effectively
Note: Product cover images may vary from those shown
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  • Adaptive Path
  • Bank of America
  • Dunkin’ Donuts
  • mFoundry
  • PNC
  • TSYS
  • MORE
1. Executive Summary

2. Introduction

3. Defining Mobile Payments
- E-Commerce and Mobile Payments
- Softcard and Other Network-Branded M-Card Solutions

4. How Apple Pay Works
- The Banks’ Response to Apple Pay
- A Competitive Analysis of Apple Pay

5. The Long Crawl to Network Adoption of Tokens
- Branded Networks’ Response to Competitive Threats: HCE and Tokens, a Timeline

6. Network-Branded Mobile Solutions Available Prior to HCE and Tokens
- MasterCard MasterPass
- The New World Driven by the EMVCo Tokenisation Standard
- Network Plans to Monetize Digital Services
- Visa Digital Solutions
- MasterCard Digital Enablement Service
- Other Networks
- Implications

7. Conclusion
- Endnotes
- For more information about this report


Figure 1: Consumers Prefer a Mobile App over a Mobile Browser
Figure 2: E-Commerce: A Combination of Any Browser, M-Browser, M-App, or M-Card
Figure 3: The Traditional Embedding of a NFC Payment Credential (PAN) into a Mobile Device
Figure 4: A Network-Branded HCE Implementation of the EMVCo Tokenisation Standard
Figure 5: How Apple Pay Works
Figure 6: The Visa Checkout Experience
Figure 7: The MasterPass Purchasing Process
Figure 8: How Tokens Change the Payments Value Chain
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- Adaptive Path
- Amazon
- American Airlines
- American Express
- Apple
- AT&T
- Bank of America
- Capital One
- Chase
- Citigroup
- Deutsche Telekom
- Discover
- Dunkin’ Donuts
- Facebook
- Fast Identity Online (FIDO) Alliance
- Fiserv
- Google
- MasterCard
- Merchant Customer Exchange (MCX)
- mFoundry
- Microsoft
- Monitise Group
- Navy Federal Credit Union
- PayPal
- Secure Remote Payment Council
- Shazam
- Softcard
- Starbucks
- The Clearing House
- T-Mobile
- US Bank
- Verifone
- Verizon
- Visa
- Wells Fargo
- Wendy’s
Note: Product cover images may vary from those shown