Payments Tokenisation Evolution: Glancing into the Future

by Zilvinas Bareisis, October 2, 2015
Industry Trends
Global

Abstract

Tokenisation is not a new concept, but it has evolved rapidly since EMV payment tokenisation specifications were published in March 2014, and will continue to evolve along multiple dimensions.

Apple Pay was the first solution to make use of EMV payment tokenisation, with the card networks playing the new role of the token service provider (TSP). Since then, the tokenisation landscape has evolved rapidly along multiple dimensions:

  • The growth in numbers and diversity of token requestors.
  • Geographical expansion of solutions making use of tokenisation.
  • Types of payment accounts supported by tokenisation.
  • Commercial framework.
  • Entities that play the role of a TSP.

In the report Payments Tokenisation Evolution: Glancing into the Future, Celent introduces the concept of tokenisation, looks at its history, and projects how it is likely to evolve. The report also discusses how Android Pay is different from Apple Pay and the implications that has on the role of the token service provider. Finally, it considers the arguments why the networks are unlikely to remain the only parties performing the TSP role, and how the TSP market might look in the near future.

“The networks deserve huge credit for stepping into the TSP role and delivering tokenisation to enable digital services such as Apple Pay, Android Pay, and others,” says Zilvinas Bareisis, a senior analyst with Celent’s Banking practice and author of the report. “The networks remain in the prime position to capitalise on tokenisation, although we expect competition for the TSP role to increase. Tokenisation brings the card rails into the 21st century and ensures that, even as the form factors change, card-based solutions continue to thrive and prosper.”

This 28-page report contains 12 figures and two tables.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

Introduction to Tokenisation

3

 

Tokenisation: Not a New Concept

3

 

EMVCo Tokenisation Framework: A Brief Overview

4

Tokenisation Evolution: Rapid Developments

7

 

2014: The Launch of Apple Pay

7

 

2015: Expansion Across the Board

8

 

2016+: A Glance into the Future

9

First Look at Android Pay

11

 

Android Pay Overview

11

 

Who Will Win the Wallet War?

13

Token Service Providers: Today and Tomorrow

16

 

The Role of Networks as TSPs Today

16

 

A Case for Other TSPs

18

 

New TSPs: Who, When, and How?

19

Path Forward

22

Leveraging Celent’s Expertise

23

 

Support for Financial Institutions

23

 

Support for Vendors

23

Related Celent Research

24

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