Pros And Cons Of Token Payment Systems

The payment industry is always evolving and there is a continuing belief that there is room for improvement. The focus these days is to secure sensitive information and data and reduce the risk of information leakage and pilferage. This is becoming all the more important because there have been a string of data breaches involving customer credit and debit cards, bank account and other such things. This certainly brings to focus a few important points about the advantages and disadvantages of these token payment systems.


Data protection: This is perhaps one of the most important reasons as to why it makes sense to go in for token payment systems. This technology uses the latest in encryption. It is about substituting critical data points with figures that are unusable. The information will have no meaning to any pilferer and will only make some meaning when it reaches the token holder. Hence this goes a long way in reducing fraudulent transactions and there will be no interception of sensitive information. This is highly important when information moves between the sale point and the card services providers. This could perhaps a long way in reducing illicit activity by quite significantly.

It Makes Transactions Anonymous

Today with the blockchain technology breathing down the neck, there is a need for bringing in anonymity in transactions between the buyer and seller. This is perhaps possible when one uses the token payment systems. Though the information which moves from the buyer to the seller might be visible by the service providers and other intermediaries, it will basically in the form of numbers which do not make any sense to them. The actual meaning of such data flow would be understood only by the two main stakeholders, the buyer, and the card services provider. Once the entire process of buying and selling is completed, then the money is transferred to the bank or withdrawn from the bank as the case may be. Here again, the token payment system could be of great use.

It Still Is Early Days

However, there is no denying the fact that these are still early days and it is expected that it will take some time before things actually get stabilized. There are some grey area and also areas of concern as far as tokenization is concerned. The same need to be taken into account. However, the encryption technology that is being used is now almost error-free and this certainly is a great step forward. But it would be naïve to believe that this would remove all problems related to security and there are still some loopholes which need to be plugged.

Fraudsters Could Target Tokens

One of the biggest drawbacks and challenges of token payment systems is that it could soon become an attractive target as far as fraudsters are concerned. In a tokenized environment, the middlemen are no longer required to store data. This could result in fraudsters and criminal becoming token holders are at least trying to become one. Further, there are some issues with the safety standards and best practices which are still not fully fixed.


However, a beginning has been made in the right direction and it will not be long before we see token payment systems being used more frequently.

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