How Fintech Tokenization Empowers Users and Drives Innovation (VB On-Demand)

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by Envestnet | Yodley

Account tokens are a highly secure way to capture, verify, manage and maintain financial data. In this on-demand webinar, these tokens help payment processors prevent financial fraud, reduce transactional risks, facilitate data sharing, and more. find out if it helps.

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Chargebacks, breaches, fraud and account takeovers are a growing problem. When a payment type is disrupted – be it with card-to-cardless payment rails or fiat payment apps – it’s not only costly for the entire ecosystem, but also disruptive to customer experience and business operations. As a result, tokenization has emerged as a form of protection that removes many of the hassles when a transaction breaks down.

Jeff Williams, VP of Product Development at The Clearing House (TCH) and Ginny Chappell, EVP of Product and Marketing at Moov Financial, join Lloyd Fernandez, VP of Product Management at Envestnet | Yodley talks about how tokenization is changing both data security and customer service in the financial services world.

Tokens have been dominant in the card world, but the technology is becoming more widespread in the banking world as a way to add an effective layer of data protection to bank or bank accounts, especially as more accounts are distributed to third parties. used for payments. Encryption only protects data at rest; must be decrypted in order to make a payment and use it to pass through all the hops in the payment flow. Depending on the use case, there are several hops in the payment flow where the data is exposed.

For tokenization, a token service provider (TSP) offers a service that accepts sensitive data, such as PAN (a 16-digit card account number) or bank account, or personally identifiable information (PII) as input. It then generates a surrogate value or token as output. The secret data and the token itself are then stored in the token store at the TSP.

A vendor or independent software vendor (ISV) can store the token in their environment without worrying about exposing sensitive PII data. Banks can simply delete and re-create an account without the inconvenience and hassle of closing and reopening an account in case of fraud. Additionally, it simplifies complex account verification processes, eliminates the need to store confidential financial statement information, and more.

Account tokens resemble and are formatted like a real account, with a routing number associated with them and an account number generated from the token service provider’s repository, which is unique to the tokens and to each bank. This makes token transactions transparent and seamless across the network, whether it’s a fintech application, corporate entity or biller.

Account tokenization provides an additional layer of protection while on vacation by encrypting the actual account. But in transit, as this token flows through the system, it is not a real account. If a hacker or hack occurs at any point in the payment flow when used on one of the network rails, it is useless and cannot be used by an unauthorized party.

Fintechs, billers, apps and other third parties may have their own unique token. If a bank recognizes fraud, or they no longer want to do business with a particular app or fintech or account or organization, they can disable that private token without disrupting the entire payments industry by blocking the account as a whole. This provides banks with very fine-grained security mechanisms to manage their financial data when they are distributed to the market, and avoids the countless costs that arise from settlement disputes.

“It costs more than $200 for a bank to close and reopen or reissue a compromised account,” Williams said. “Then think about all the different places you have in the report. It’s cumbersome and expensive to reopen an account, close the old one for a customer, and find all the locations that have the old one. The beauty of the icon is that you request it directly from the warehouse. This repository knows exactly where these tokens are distributed for that account, which is useful in any fraud situation.

Watch this VB On-Demand event now for a full roundtable discussion with industry experts on the many benefits of tokenization, from how it empowers users to how it drives innovation.

Stream on demand here!

Here’s how to get account tokens: