REDWOOD CITY, Calif., December 12, 2024 – The U.S. Payments Forum brings together insights from the industry’s top organizations in its fall market snapshot. It offers perspectives on the technologies shaping the way we pay, including tokenization, artificial intelligence, Payment Account Reference (PAR) and SoftPOS. The information provided in the snapshot was gathered during the Forum’s Fall Member Meeting in Newport, Rhode Island.

Tokenization’s impact

Bank of America teamed up with Mastercard and PULSE networks to deliver an engaging keynote address about the rapid evolution of payment tokenization. At its core, tokenization is security-driven because it replaces sensitive card information with a unique digital identifier that is fraud-resistant. As more members of the payments ecosystem embrace tokenization, authorization rates are expected to rise, especially in card-not-present (CNP) and card-on-file transactions. PULSE, for one, expressed its support for card-on-file tokenization and expressed that it is working closely with participants to understand behaviors associated with the practice.

Some have observed a significant improvement in authorization rates for card-on-file transactions. One speaker shared that in debit transactions, for certain issuer’s non-prepaid programs, authorization on tokens beats PAN-based by 3 to 8%. While promising, the size of the sample may be too small to draw definitive conclusions at this point in time. Despite the benefits, there are some concerns surrounding the provisioning of digital wallets, a big use case for tokenization. Bad actors are leveraging social engineering tactics to receive one-time passcodes to provision tokens. Many Forum members in attendance agreed that manual key entry provisioning must be eliminated to stop this type of fraud.

Regarding enablement, Mastercard shared that financial institutions are seeing consumer portfolios readily embrace tokenization while adoption among some commercial portfolios, particularly small and mid-sized businesses with leaner resources, have been slower to adopt it. However, they are quickly realizing its benefits. Another barrier to adoption has been that some traditional merchants have systems that rely on card numbers as identifiers for customers, whether for fraud systems or loyalty programs. Payment Account Reference (PAR) was touted by the keynote speakers as a potential solution to this problem. PAR is used to tie individual tokens (e.g., that are created and used with digital wallets and for online purchases) and reissued card numbers to one payment account number (PAN). When using PAR, payment ecosystem participants can tie all transactions (including tokenized transactions and reissued card numbers) to one account.

PAR at the forefront

Forum members are pushing for updated information on industry readiness for PAR’s implementation due to its many potential benefits. Above all, it can be used to help stakeholders gain a more comprehensive understanding of consumer behavior. For example, if a customer inputs their physical card number into a guest checkout with an online retailer and, in a different instance, purchases with a mobile wallet, and in yet another instance, makes a purchase using a browser autofill – PAR would be assigned to those transactions to make the seemingly discordant payments connect to a single payment account. This information would be invaluable for tracking fraud, optimizing loyalty programs, tracking the success of promotional offers and several additional use cases.

PAR is also coming up in the transit payments sector. A meeting attendee shared that the implementation of PAR on EMV chip has been discussed for transit open payments in scenarios when a customer uses a card to “tap in” and their mobile wallet to “tap out.” PAR would allow transit agencies to tie those transactions together seamlessly. Adding PAR to chips has been met with some backlash because it would require that cards be reissued which could become costly. The Forum will continue to weigh the pros and cons and work toward educating the broader industry on how PAR can be utilized throughout the payment lifecycle.

AI and emerging technologies

Excitement continues to build around artificial intelligence and the ways it can be utilized to strengthen payment processes. Stakeholders shared updates on AI during a roundtable for issuers, merchants and acquirers.

A spokesperson for Velera, a credit union service organization and fintech solutions provider, shared that the company is exploring AI applications to aggregate and analyze data from financial institutions. The information would be used to craft curated marketing initiatives for consumers and businesses. In banking, AI is being used to assist customers with budgeting by analyzing their transaction history and habits, according to a large issuing bank. The relationship between AI and fraud was also a major point of interest. During a roundtable for global payment networks, concerns were raised about generative AI creating new fraud vectors. This includes genAI’s ability to develop extremely convincing phishing attacks, synthetic identities and near-perfect document forgery, among other things. On the other hand, AI is being used to fight fraud in equal measure. It is being used by various stakeholders to identify fraud patterns and swiftly adapt or respond. In fact, meeting attendees shared that machine learning has been integrated into fraud prevention tools for many years now.

Innovations in SoftPOS and digital IDs are also gaining traction. When considering what’s in store for the future of payments, one speaker shared that the industry is exploring how to transform consumer devices into payment devices beyond just smartphones. For example, in-vehicle transactions where the car operates as the payment device for things like drive-thrus, tolls, registration and recurring subscriptions. A spokesperson from Discover Global Network explained how digital IDs like mobile driver’s licenses (mDLs) could improve payment authentication by providing trusted, encrypted and tamperproof identity verification during tap-to-pay transactions. Merchants could authenticate a customer and accept a payment with a single tap on a mobile device.

Forum priorities

The U.S. Payments Forum’s primary focus is to provide a platform for solving cross-industry challenges and promoting innovation. This is achieved through collaborative discussion, networking events and educational resources. At present, the Forum is assessing the operational impacts of the Illinois Interchange Fee Prohibition Act. The Act is scheduled to take effect July 1, 2025, and, among other things, prohibits the assessment of interchange fees on specified taxes and gratuities as defined in the Act. The Forum is developing a white paper aimed at offering impartial insights into solutions for compliance with the IIFPA. It will also examine the potential effect it will have on payments industry participants.

The Forum is working on a number of additional projects on the following topics:

• Secure Remote Commerce (SRC)
• Machine learning for fraud prevention
• Fleet acceptance within electric vehicle (EV) networks
• Best practices for securing mobile and touchless payments

Resource recap

The Forum experienced a surge in activity over the past several months, resulting in the publication of the following resources:

• Role of Payment Account Reference (PAR) Within the Payments Lifecycle: A resource that takes an in-depth look at how PAR can benefit the full scope of payment ecosystem participants.
• Exploring Data Elements in Mobile Payment Transactions: A resource detailing how expanded data elements in digital transactions can be leveraged to enhance security, fraud prevention and user experiences.
• Podcast: Preparing for the Rise of Quantum Computing: A podcast featuring speakers from Mastercard, Global Payments, PQShield and Cryptomathic. It covers how quantum computing will transform payment security and how to get ahead of potential hurdles.
• The Role of Mobile IDs in Payments: A white paper exploring how mobile IDs can be used in the payments ecosystem, both in-person and online, including examples of where digital identities and digital payment acceptance can converge.
• Strengthening the Security of Consumer Authentication through Phishing-Resistant Multi-Factor Authentication: A resource outlining the immediate steps payments stakeholders can take to mitigate phishing risk and the potential challenges associated with traditional authentication methods

Organizations, associations, government agencies and individuals interested in participating in upcoming Forum projects can visit the Secure Technology Alliance’s website to learn how to become a member. By joining the Secure Technology Alliance, members will have access to activities within the U.S. Payments Forum, the Identity and Access Forum and additional Alliance working committees.

About the U.S. Payments Forum

The U.S. Payments Forum is a cross-industry body that brings stakeholders together on neutral ground to enable efficient, timely and effective implementation of emerging and existing payment technologies. This is achieved through education, guidance and alternative paths to adoption. The Forum is the only non-profit organization whose membership includes the whole payments ecosystem, ensuring that all stakeholders have the opportunity to coordinate, cooperate on and have a voice in the future of the U.S. payments industry. The organization operates within the Secure Technology Alliance, an association that encompasses all aspects of secure digital technologies.

About the Secure Technology Alliance

The Secure Technology Alliance is the digital security industry’s premier association. Through its U.S. Payments Forum, Identity and Access Forum and its collaborative working groups, the Alliance fosters open dialogue among industry stakeholders to explore and develop secure technology innovations in the payments, identity and access markets. By collaborating on education and guidance, the Alliance helps enable efficient, timely and effective implementation of large-scale, disruptive technologies. For more information, please visit https://www.securetechalliance.org.

Contact

Sherlyn Rijos-Altman
Montner Tech PR
203-226-9290
[email protected]