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Payment Security

Tokenization: The Secret Key to Digital Payment Security

payment-tokenization

The rise of digital shopping triggered a world of innovations that boost security and consumer experience. Tokenization is among them. Of the 2.1 billion digital buyers worldwide, most of them may never know what tokenization means—or what it means for the future of their personal data security. 

The not-so-secret world of tokenization

Apple Pay, for example, became the market leader over Starbucks in 2019 with 30.3 million users or 47.3% of mobile payment users in the U.S. What those consumers probably don’t know is that Apple Pay uses tokenization. Apple customers take a photo of their credit card and load it into their iPhone. From this, Apple creates a random, algorithmically generated number—a token—that represents the credit card information. 

Likewise, in late January 2020, Visa released the Visa Token Service (VTS) that is estimated to process a combined e-commerce volume of $1 trillion. According to Visa’s Chief Product Officer, Jack Forestell, “as digital transaction volume grows, there has never been more urgency to build increased confidence in the seamlessness and security of online shopping. This is why Visa is committed to the success of the click to pay experience and the added level of security that tokens bring to electronic payments.”

Extra security measures for consumers and retailers alike are essential as more consumers spend online. Over the 2019 Christmas shopping season, for example, consumers spent $125.6 billion online. More than a third of that spending took place on their smartphones. Currently, 69% of U.S. consumers store a card-on-file or set up recurring billing with trusted retailers. 

However, storing sensitive banking and personal information is a security risk and liability for merchants, e-commerce sites, and retailers. That’s where tokenization comes in.

What is tokenization?

Tokenization adds a layer of security to consumers’ sensitive information, such as bank account and credit card details. It protects sensitive data by replacing it with a unique and randomly generated number. This number is called a token. Tokens help the organizations and retailers securely store and transfer information. 

Not only do tokens replace sensitive numbers and data with an algorithmic number, but they also retain the essential information. Think of them as a unique code to a lockbox full of information. The bank account and accompanying personal data are stored in a secure token vault. 

Rather than using credit card information to make digital payments or purchases, tokens are used. These tokens can be stored in and passed through e-commerce sites and wireless networks without ever sharing actual bank account or personal details. In fact, most retailers and e-commerce sites will never see or have access to a consumer’s actual bank information, even if the token is specific to that retailer.

Instead, they work with secure third-party technology companies that connect a token purchase back to the original bank account information—and arm themselves with enhanced security features. Which brings us to our next point.

VoPay on tokenization: The future of payments

Payment experts are seeing an uptick in tokenization as more organizations move away from encryption. This is because tokenization is a more cost-effective, secure, and user-friendly way to protect sensitive consumer data. 

VoPay’s Intelligent EFT / ACH (iQ11) payment service, for example, accepts tokens from numerous leading data aggregator companies including Plaid and Flinks. These secure API partners create and store their own secure tokens. This means that a user can skip all of the authorization access and bank account selection steps while they’re shopping online. This streamlines the payment check-out experience even further than ever before. Once a user has granted access and their data is tokenized, there’s no need to ever do it again. 

With VoPay’s next generation bank payment service, only tokens are ever shared between consumers and retailers—not sensitive bank account or credit card information. By streamlining this experience, security, and integration, we’ve been able to create one unified token that can unlock an entire digital ecosystem.  

Learn more about VoPay today.

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Fintech

15 Fintech Companies to Watch in 2020: Part II

fintech companies to watch two

Happy 2020 readers! This is the second post in a two-part blog series titled 15 fintech companies to watch in 2020. Read part one with the first 7 fintech companies to look out for and meet us back here shortly

Here are the last, but certainly not least, 8 of 15 fintech companies to watch out for in 2020—and the ones that we believe are paving the way for an entirely new financial industry in the years to come.

15 fintech companies to watch in 2020: Part II 

8. Hydrogen

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American global fintech company Hydrogen is an acceleration platform from which businesses can deploy fintech apps and solutions. Hydrogen provides its B2B customers with a powerful toolkit in order to build innovative digital financial applications at a fraction of the time and cost. For example, VoPay and Hydrogen have partnered to offer end-to-end open banking payments in 2020 and beyond. Hydrogen is part of a leading group of firms that are helping make fintech 2.0 more open, accessible, and innovative through APIs (Application Programming Interface). 

9. KOHO

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One review of KOHO Financial called it a “marriage of a bank and budgeting app,” which is a helpful way to put it. This Toronto fintech company is a mobile-banking service that has helped more than 120,000 Canadians track their spending. In May 2019, the company raised $42-million in growth capital. Similar to a chequing account, users put money into their KOHO accounts and spend as if it were a credit card (but without the monthly fees). The app tracks their spending, savings, and helps them budget toward goals in real-time. 

10. Envestnet | Yodlee

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The American software company, Envestnet | Yodlee, is a leading data aggregation and data analytics platform for digital financial services. Envestnet | Yodlee as over 25 million users worldwide and over 1,200 financial institutions and fintech partners (including 15 of the top 20 U.S. banks). It supports and powers many financial technology companies and banks, allowing users to access their personal financial accounts from any device, anywhere and transform modern banking. 

11. Borrowell

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In 2019, Borrowell closed a $20 million Series B funding as it reached over one million users. This Canadian fintech company gives its users a free credit report and credit score—no strings attached. Borrowell helps Canadians track their credit score and make better, more informed decisions about their credit (and financial situation). 

“Consumers want to know where they stand with their finances,” Andrew Graham, co-founder and CEO of Borrowell told BetaKit. “We help them do that, with our free tools, product recommendations and credit scores and reports.”

12. Flinks

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Flinks is a Montreal-based data software company that connects to over 250 million financial accounts and provide financial insight and credit risk intelligence. In other words, it provides the necessary link and data between mobile financial apps, financial institutions and consumers who want to modernize their banking. For example, in October 2019, Flinks and VoPay announced an official partnership in order to provide a secure consumer-focused open banking payment solution via VoPay. 

13. Kabbage

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Kabbage Inc. was named on the Forbes Fintech 50 2019 and recently valued at $1.2 billion. This Atlanta-based fintech company saw an opportunity back in 2008 to improve the efficiency and profitability of small business lending. Where banks have a high standard to meet for small business loans, Kabbage’s automated lending platform pulls data from many data sources. This allows Kabbage to automatically evaluate the health of the business, asses the risk, and provide a line of credit where applicable.

14. MX

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MX has been called one of the fastest-growing fintech companies—and one to watch out for in 2020. MX provides financial services data, such as data aggregation, enhancement, and analytics, and experience, such as mobile banking and verification. In June 2019, the company announced a $100 million Series B round of financing, bringing the total equity financing to $175 million. According to Battery Ventures’ (the Series B investor) Michael Brown, “MX is powering some of the top financial institutions in the world and is simply one of the most promising fintech companies we’ve ever seen.” 

15. VoPay

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Last, but most certainly not least on the 15 fintechs to watch in 2020, is VoPay. This Canadian-headquartered fintech company is a leader in digital payment technology innovation. VoPay empowers businesses to provide exceptional financial services and create a customer-focused open banking payment solution. The company made several strategic moves in 2019, including by announcing its partnership with Hydrogen and with Flinks in order to offer seamless banking experiences for users across North America.  

Stay tuned for more growth from us in 2020 and beyond. Learn more about VoPay and our payment solutions

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