Apac cross-border e-commerce: tokenisation is key

Electronic commerce (e-commerce) markets across Asia Pacific continue to develop, according to Visa’s 2015 Regional eCommerce Monitor Survey published last October. The region’s consumers show growing levels of e-commerce engagement driven by increasing internet penetration, the proliferation of mobile devices and evolving domestic markets.

There is a shift towards greater use of mobile devices for e-commerce. Mobile commerce (m-commerce) has achieved greater take-up in the various markets of South East Asia particularly, compared with their overall e-commerce adoption. Cross-border e-commerce is common across many markets but has substantial space to grow, with most purchases still being from domestic merchants. Enabling consumers to save money is the key trigger overall, but various other mechanisms – such as greater access to products – can also be effective in different markets

For card issuers the game has changed, as consumers increasingly pay with their phone instead of the physical card. It is no longer enough to be top of the physical wallet. Consumers will increasingly pay through card-on-file in mobile apps such as Uber and Amazon. This means issuers will need to compete to be “top of merchants”, or become the default card in the merchant’s mobile wallet and will also need to think about how to be “top of phone”. That means being the go-to payment app among multiple e-wallets that could reside in the customer’s phone – and becoming the default card in any of these mobile wallet applications, including third party wallets.

Talking tokenisation

So to make the move to the digital future, we need additional capabilities and platforms that will allow plastic to be removed from the process and payment details made available in a secure fashion across a range of digital devices and applications.

One such capability is tokenisation – the technology that replaces a 16-digit credit card number with a “payments token” based on the industry tokenisation standard, which is managed by the smart payment card consortium EMV Co. In other words, tokenisation replaces cardholder information, such as account numbers and expiration dates, with a unique digital identifier – a “token” – that can be used for payment without exposing a cardholder’s more sensitive account information. Tokenisation hides consumers’ confidential account information during digital transactions, making digital payments more secure.

Tokenisation, via inter-operable platforms and based on the global payment tokens standard – makes token issuance simple and cost-effective for issuers and third party digital payment service providers.

The key benefits of tokenisation include:

• Tokens do not carry the consumer’s primary account number, so there is less risk in storing tokens on mobile devices, online by e-commerce merchants and in cloud-based mobile applications.
• Tokens are based on existing International Organisation for Standardisation (ISO) standards and can therefore be processed and routed by merchants, acquirers and issuers like traditional card payments.
• Tokens tied to lost, or stolen mobile devices, can be instantly reissued – without the need to change the consumer’s primary account number or reissue the plastic card.
• The new service supports issuance of multiple tokens for a single primary account, each tied to a specific mobile device or service.
• Tokens can be restricted for use with a specific merchant, mobile device, transaction or category of transactions.

Tokenisation is available all the major mobile wallet providers including Apple Pay, Android Pay and Samsung Pay. International expansion is underway in Apac regions and this will support the bank mobile payment solutions, such as third party wallets or host card emulation and other use cases around remote payments.

In Asia Pacific, Singapore and Australia are among the first countries to introduce tokenised service. National Australia Bank (NAB)’s new mobile payment service enables customers to use their mobile phone to make in-store purchases without the need for a physical card. Singapore United Overseas Bank (UOB) has also implemented tokenisation as part of its digital wallet, UOB Mighty. The service allows UOB credit or debit card members to make contactless payments with an near field communication (NFC)-enabled Android smartphone simply by launching the UOB Mighty app, selecting the ‘Pay’ function, entering a perosnal identification number (PIN) and tapping to pay at all NFC-enabled terminals in Singapore and overseas.

In addition to this, the various Pays (Apple Pay in Australia and Singapore, and Samsung Pay in Singapore) have announced their expansion plans in the Apac region.


Related reading