By 2030, Mastercard plans to phase out the manual entry of card information in European e-commerce transactions. Digital buyers who have become accustomed to entering their 16-digit card number and personal data will now be able to make purchases with a single click.
The foundation for the credit card giant’s new process is tokenization, and it will allow Mastercard to replace fixed card numbers with a randomly generated sequence. Roughly 25% of worldwide Mastercard transactions are tokenized, but the company reported those transactions are growing at a 50% year-over-year rate.
The increased adoption is partly because customers are beginning to understand the benefits of new process. Because tokenization is handled by the issuer behind the scenes, there’s no effort required by consumers.
“In Europe we have seen tokenization gaining momentum across the ecosystem, the convenience and reduced rates of fraud sell themselves,” said Valerie Nowak, Executive Vice President of Product and Innovation at Mastercard Europe. “We are confident that reaching this vision by 2030 is a win-win-win for shoppers, retailers and the card issuers alike.”
Lowering the Security Burden
Along with convenience, tokenizing card numbers can reduce fraud and lower the security burden on merchants, payment platforms, and financial institutions. Tokens don’t have intrinsic value, so if they are stolen, they are effectively worthless.
Tokenization will also eliminate the need to reissue a new card if the old one is lost or stolen. And if a credit card expires, the token does not, so customers won’t have to update their card information with each individual retailer or subscription service.
European Innovation
The announcement is the latest in a series of initiatives by Mastercard to incorporate decentralized finance technology into its well-established global infrastructure. The company recently launched its crypto ecosystem, Mastercard Crypto Credential, which will initially be used for global peer-to-peer crypto transactions.
Crypto Credential was launched in Latin America and Europe because the two regions have been hotbeds of payment innovations. One of the main reasons Mastercard will implement wide-scale tokenization in the EU is because those consumers have been more avid adopters of open banking concepts and emerging payments technology than the U.S.