Tag Archives: Visa

Digital Tokens – The new Holy grail of eTransactions


As the number of eTransactions keeps increasing in our daily financial world, the number of criminals trying to access the customers’ finances is also on the increase.

Yes, there have numerous tools released by Payment Giants to reduce the instances of fraudulent transactions. It is like a cat and mouse race, and when the tips favor the criminals, the shoppers might reduce their eTransactions.

The challenge for Payment Giants is the varied messaging systems, which at times do not talk to each other. Yes, diversity is good, as in case a messaging system is compromised, the risks will be restricted to that messaging system only.

The other part of the coin is oligopoly, which is preferred over Monopoly.

To raise the security barrier for eTransactions, the three major Card issuers i.e Visa, MasterCard and American Express have joined hands.

They have proposed Digital Tokens for online and mobile transactions. The broad guidelines have been finalized, and they are calling on other industry players to support their proposed framework for the new standard, which would be a Global Standard.

The main supporting argument is that the Digital Tokens would make life simpler and safer for customers shopping on a mobile phone, tablet or PC.

The proposed framework would see issuers, merchants and digital wallet providers able to request a token so that when an account holder initiates an online or mobile transaction, the token – and not the traditional card account number – would be used to process, authorize, clear and settle the payment.

The tokens can be customized basing on customer risk preferences i.e tokens could be restricted in how they are used with a specific merchant, device, transaction or category of transactions.

The new framework will be built around existing industry standards to keep the investment to a minimum and also ensure consistency around the world.




Over the coming weeks, the framework will also be presented to other partners and independent industry bodies, such as The Clearing House, PCI Security Standards Council and EMVCo, to align and further advance the standard.

This industry wise collaboration is similar to collaborations for the adoption of Magnetic Stripe, EMV or NFC

Australian Credit Card Holders in near future need not Sign anymore on Merchant Slips


MasterCard and Visa in a joint application to the Australian Competition and Consumer Commission have supported PIN only credit card transaction. Both the major card issuers feel that the Signature requirement on Credit Card Slips is the major cause for credit card fraud.

Hence, they have opined that only PIN@POS be adopted to reduce the card fraud. PINs are difficult to be stolen, whereas signatures can easily be forged. Moreover, I am not sure as to how many merchants verify the signature on the card and on the slip. In India, the % is less .05%.

As PIN@POS involves a major infrastructure upgrade, small merchants are very receptive to this idea. Moreover they feel that the transactions volumes might reduce. Mobile eftpos terminals have to be brought or customers have to walk to the cash counter. This should not be a major deterrent, as the mobile eftpos terminals are not that expensive.

However, in India after introduction of an additional factor of authentication for CNP (Card-not-Present) transactions, the value and volume have gone up. Business associations had the same fear, that RBI’s move on CNP transactions would affect eCommerce. But, the Indian consumers are savvier.

Other card issuers like American Express, Diners also support Visa and MasterCard on this. However, American Express is not a signatory to the proposal, as signing the proposal might be viewed as cartelization!!

As it is already Visas’ PayWave, MasterCards’ PayPass, digital wallets, mobile apps, online payments do not use Signature as an authentication tool.


Will consumers benefit by European Commission Legislation on Interchange Fee Cap?

On 24/07/2013, the European Commission will commence discussion in European Parliament on the maximum cap on interchange fees that can be charged by Card Issuers, in European countries

Since 2000, the European Commission was negotiating with Visa Europe and MasterCard to limit the interchange fees. Finally, the Commission has drafted proposed legislation that—according to Bloomberg—would reduce credit card interchange fees to 0.3 percent and debit card fees to 0.2 percent.

At present, the debit card interchange fees varies from 0.1 percent in Denmark to 1.6 percent in Poland, reported The Financial Times. Germany is a bit higher, with an average of 1.8 percent for credit cards, and France has a lower average of 0.5 percent.

As the interchange fees constitute a sizeable portion of the respective Bank’s fee income, it is not clear if the consumers will be benefited or not. One of the possible options Banks have is to increase the consumer fees.  This would negate the caps imposed by European Commission.

Under the Commission’s proposal the caps would apply only to cross-border transactions for the first two years. After the two-year transition, caps on domestic transactions will also apply.

In countries such as Australia and the US, reductions in interchange fees have resulted in consumers paying higher bank fees. How consumers will fare in the end, is the big question looming over the proposal. EU banks are sure to complain that consumers will lose and retailers will win. EU Parliament has much to consider when future debate about the legislation commences.


Europe at last moves to regulate card fees

Commission to go ahead with cap on card fees