Wednesday , March 22, 2023

Tokenization Gets a Boost as The Clearing House Signs on To Manage Mastercard Tokens

The Clearing House, a major player in U.S. payments, is getting deeper into the tokenization business through a new pact with Mastercard Inc.

New York City-based The Clearing House and Mastercard announced Thursday that TCH has become a Mastercard-certified third-party Token Service Provider (TSP). As such, TCH will be able to provision and manage Mastercard-branded tokens for its financial-institution clients to protect payment transactions originating with Mastercard credit and debit cards. TCH plans to launch the service in 2018’s first quarter.

(Image credit: The Clearing House) “The use cases [of tokenization] are going to continue to expand,” says The Clearing House’s Fortney.
Tokens, which are generated by networks such as Mastercard and Visa Inc., are strings of digits that stand in  for payment card account data. If stolen by data thieves, tokens are useless for committing payment fraud. TCH’s tokenization services conform to specifications set by EMVCo, a standards body owned by the global payment card networks, according to TCH and Mastercard.

“We look at tokenization as one, not the only, block in protecting the payment system and eliminating the reliance on customer account numbers,” Dave Fortney, executive vice president of payments product development and strategy at TCH, tells Digital Transactions News.

For now, TSP services are simply an addition to the menu of services TCH, which owns The Clearing House Payments Co., already offers its financial-institution owners and clients, according to Fortney. The payments unit operates the nation’s only private-sector automated clearing house and wire-transfer system, settling nearly $2 trillion in ACH and wire volume daily.

“What we’re announcing today is relating to effectively Mastercard-branded card payments,” he says. Such payments would include mobile and e-commerce transactions, and the expanding volume of Internet of Things payments, he adds.

“Through this partnership, banks that issue Mastercard-branded cards now have the choice to tokenize their customers’ accounts through TCH, providing their customers digital-payments options that offer the same safety, security, rights and benefits as accounts tokenized by Mastercard,” Sherri Haymond, executive vice president of digital partnerships at Mastercard, said in a statement.

TCH, which said in a statement that it “has been a long-time participant in tokenization,” likely will be offering more TSP-related services in the future. The company is deeply involved in the Federal Reserve’s Faster Payments project and submitted a proposal with processor Fidelity National Information Services Inc. (FIS) for a real-time faster-payments system that, in a field of 16 proposals, tied for the highest marks from outside reviewers commissioned by the Fed.

“The use cases are going to continue to expand,” Fortney says. “Our strategy with tokenization does indeed extend beyond card payments to real-time payments.”

TCH’s faster-payment proposal uses technology from Vocalink Holdings Ltd., a British company that operates the United Kingdom’s Faster Payments scheme. Mastercard acquired  Vocalink this spring.

“Obviously the fact that Mastercard has closed their deal wth Vocalink has created a tighter partnership between us and Mastercard,” Fortney says. But he adds that TCH was talking with Mastercard about tokenization “well before they acquired Vocalink.”

In addition, TCH could become a TSP for other token generators, including Visa. “We’re looking to partner with all networks,” says Fortney.

Mastercard, meanwhile, expects further growth in its tokenization business through more TSP partnerships.

“Since publishing the TSP rules and standards in August 2016, Mastercard has received requests from multiple players in the industry to become a certified TSP for Mastercard accounts,” a spokesperson tells Digital Transactions News by email. “Several TSPs have completed the certification process, while others are still in progress.”

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