How MasterCard Will Bring Tokenization To Asia-Pacific

Across the Asia-Pacific region, each market is on its own path to secure digital transactions. In Australia, two-thirds of MasterCard transactions are already contactless in-store payments. In more emerging markets like Indonesia, consumers are just getting online to transact with mobile devices, but are well on their way toward a “tokenized” future. MasterCard SVP of Emerging Payments for Asia-Pacific, Raj Dhamodharan, recently sat down with MPD CEO Karen Webster to offer his insight on how MasterCard’s platform helps the ecosystem more easily absorb the process, the challenges his region faces and who he thinks is best fit to establish the industry standard and make that tokenized future a reality.

KW: Let’s talk about tokenization, which is a very popular concept today in payments around the world. I’m curious – what’s the role of tokenization in making transacting secure in the region that you’re responsible for?

RD: In the payments industry, we’ve always seen commerce follow connectivity. It started with the PC world, and then we started consuming content, mobile, then commerce. What we’re looking for is a standard in the technology that can secure payments in the online, digital and mobile world. Tokenization provides the platform – that in essence is a building block for us to secure payments online.

There are a couple of different markets where we’re looking to apply this, and some of the technologies on the security side that we use here as well. If we look at the Asia-Pacific region, there’s really a mix of markets there. You have Australia on one end, the most advanced market in terms of technology, and then there are some emerging markets, which are just getting online and conducting transactions.

In Australia, two-thirds of our MasterCard transactions are contactless in-store. That provides a strong basis for us to apply tokenization as we move from card-based contactless to mobile-based contactless payments – we look to apply that there in the near future. And in emerging markets, in Indonesia, people are just getting online. We have not applied tokenization there yet, but we have another technology called MasterCard In Control, which generates, for example, a one-time card number. People can use that one-time number online, and that’s especially for consumers holding debit cards who are uncomfortable putting their card numbers online. That will be great, especially for digital music downloads, games and so forth.

KW: So when we talk about tokenization, it’s a very broad topic. I’d love to get your perspective on the implications for various players in the ecosystem. I think there are probably different impacts to different players. We’ve seen it in other parts of the world, but as you point out, Asia-Pacific is a mix of markets that has a variety of development within it. Thinking about merchants, banks, consumers and issuers, what’s their role in that area?

RD: It could vary by market, but let’s take a market where we are applying the technology today. The banks’ benefits are very clear – within that ecosystem, many are moving toward tokenization to eliminate fraud and make sure transactions are secure. Then the benefit from an issuer perspective is quite clear. Not only is it making those digital transactions secure, but the way we’ve provide tokenization infrastructure for issuers gives them access to mobile wallets – not just theirs, but third parties’ as well. Issuers see that as quite an advance. From a merchant perspective, transactions are secure and complete through issuer wallets and third-party wallets. There are also very minimal changes to infrastructure for merchants – and in the face-to-face world, they’re not changing anything at all. Existing infrastructure is great, and that’s the beauty of building standards on top of that.

KW: There’s a big misconception about EMV as a standard and EMV the application of that standard on the card with a chip. Of course, in the U.S. we’re going through the migration, yet I think it’s important to separate the standard and the tokenization application on top of that EMV standard. That’s what makes the process efficient and probably a lot easier to get distributed across various markets. Is that right?

RD: That’s correct. The beauty of basing it on EMV has profound implications to everyone in the ecosystem. The methods have evolved over the years, and basing it off systems that are already in place really reduces the incremental that businesses have to make to support this. On the merchant’s side, it is business as usual, and on the issuer’s side, they need to recognize these new types of transactions. And MasterCard is helping them do that by building off of their infrastructure.

KW: In your opinion, who’s best suited to establish the standard around tokenization and take on the responsibility of creating them and distributing them?

RD: We discussed the role of EMV, and when we were discussing that early on across the industry, we said there needed to be a standard. Similarly, in this case, it’s not about who’s bringing the technology first to market, but rather how the industry can upgrade itself to make transactions secure in the digital world. We’re working toward a standard for that reason, and other networks are participating in the creation of the standard as well. The industry as a whole is then benefiting from that.

In terms of who actually provides the tokenization technology, a number of players can do that. The standard allows for it. What we have done is produce technology to insert tokens into whatever wallet the consumer wants to use, without making issuers invest in building this complex infrastructure. We also make it future-proof. Those two value propositions really make a good case for issuers.

KW: So tokenization is a concept that’s been around for awhile, yet it’s all of a sudden become the hot vocab word in payments. What are some of the misconceptions that exist about tokenization now that it’s a hot topic?

RD: Tokenization as an idea has been around for quite some time as a way of shielding consumer data. But what makes it different this time is tokenization using an approach that builds off of the EMV standard. Why is that important? It makes it easier to absorb for the ecosystem – no significant changes are necessary. Of course, there are additional attributes to show what levels of security have been applied, but that’s not news to anyone who’s dealt with EMV transactions. Tokens finding their way to wallets of today is what really is making a difference.

KW: So is there a big learning curve for you when you are out talking to merchants about tokenization and its role in helping to protect transactions that they want to enable sales? And do consumers need to know anything about tokenization?

RD: On the merchants’ side, as well as our ecosystem partners, everyone has the role of understanding tokenization and enhancing products that support them. We have existing structures in place. We have a global risk conference that brings in all industry partners – including issuers, key merchants, and vendors – to talk about the risk-related issues of the day and how we solve that. Tokenization has been a topic of interest in that for the last couple of years, and that’s where we get industry feedback as well. That feeds into our next product cycles.

For consumers, we always relied on our issuer partners to communicate the benefits. I don’t think consumers need to know how tokenization works, or even the word tokenization, much like EMV technology. But what they need to know are the benefits it brings – security and a peace of mind when they transact online, and the ability to use any mobile wallet securely.

KW: Let’s go back to where we started. You described the region you’re responsible for as a mix of payments acceptance and development in terms of the technology and the way in which consumers and merchants interact. How do those challenges influence how the market around tokenization and things we talk about evolve? Does it make it harder or just longer in terms of getting things moving?

RD: I don’t look at tokenization as the technology that needs to be deployed now, everywhere in Asia-Pacific. That’s not the objective. The objective is to make the payments ecosystem evolve from wherever they are today to the next best place.

In Asia-Pacific, we have millions of consumers that are using mobile devices before using PCs – it’s not a PC-first world. One of the ways we’ve been focusing on driving acceptance for small merchants in emerging markets is through mPOS devices. Those are becoming easy ways for them to accept card payments. From Indonesia, to Thailand, to Vietnam, we’ve been working with various partners to bring this technology to the small business side.

As far as tokenization is concerned, I think each market will take its own path in that evolution. We’ve just started with contactless and in-app payments, and over time we’ll roll it out to tokenized digital transactions. The road ahead looks very bright.

Raj Dhamodharan
Group Head, Emerging Payments – Asia Pacific, MasterCard

Raj Dhamodharan is Group Head of Emerging Payments, Asia/Pacific. In this role, Raj is responsible for MasterCard’s emerging payment products and strategy in the region including MasterPass, contactless payments, eCommerce, mobile commerce, person-to-person payments and inControl and chip products.

In his previous role as the regional head of Mobile and eCommerce for Asia/Pacific, Middle East & Africa (APMEA), Raj led the successful rollout of MasterPass and Mobile NFC wallets across the region, as well as established the various commercial partnerships including the partnership with C-SAM, which led to its eventual acquisition.

Prior to joining MasterCard, Raj worked at Visa in various product and technology leadership roles in mobile, eCommerce and loyalty areas. Prior to that Raj co-founded and ran Think Business Networks, a telecom software company in Silicon Valley that built products for MNOs across the world.

Raj holds several patents in the field of loyalty marketing/advertising and payments.

Raj graduated from Coimbatore Institute of Technology, India with a Bachelor’s degree in Computer Technology. He also holds MBA degrees from the Columbia Business School, Columbia University, NY and Hass Business School and University of California, Berkeley.

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