What’s next for tokens?
In our previous articles, we introduced tokens and discussed why you should start tokenising. We will end our series with thoughts on the future of tokens in payments and the payment card business.
An increased need for convenience will remain the main driver for tokenisation. As we know, within mobile wallets (such as Apple Pay/Google Pay) and in cases of particular issuers that use proprietary solutions, tokenisation is the underlying technology enabling them. As demand for these wallets is only expect to increase, we can expect more and more tokenised transactions in the future. The biggest advantage of mobile wallets is that they provide everything that plastic cards can, but also many more things. For example, in most cases, if customers have a few different bank accounts, they will also have a few different plastic cards. Also, if the same customer has access to their corporate account, they will most likely also have a card for business (and yes, it is possible to have a few plastic cards within one card, but multi profile chips are out of scope of this article as they are quite a niche market). And we would argue that the customer does not need a pile of plastic cards. The customer needs a convenient method to pay for his or her goods or services. And as the average customer is likely to spend a few hours per day looking at their smartphone, why not allow these smart phones to function as payment cards? So, we would forecast that in 10 years, plastic card production will see a decline and most customers will start using their mobile wallets, possibly without the need to order physical plastic card. Of course, that leaves a question about the current prestige payment cards. As argument might be made that customers who now buy gold or platinum credit cards want not only a convenient means of payment, a lifestyle accessory as well. So, our prediction is that prestige cards will remain on the market for longer than regular cards, in the same way that you are more likely to see person with Rolex watch than some non-branded watch. A non-branded watch shows the time the same as many other devices around us, providing no value for customers, the same way that cards plastic cards are no longer expected to provide more value to customer than a tokenised card in a smartphone. But prestige cards might provide value by showing exclusivity.
The second driver for tokenisation will be IT security. As IT breaches unfortunately become more and more common, merchants will need to consider ways to limit the risk of data breaches. One of options would be to decrease probability of a breach by increasing the level of security, but another would be to minimise the impact of a breach by tokenising cards data, thus never storing sensitive card details in the first place. The latter option is significantly less expensive than the first one, making it a simple business decision to move forward with tokenisation
Our forecast is that tokenisation trend will continue to grow and over several years and a significant part of all payment card traffic is expected to be tokenised.