Visa readies network tokenization launch in Europe, sets the stage for Apple Pay debut

"We believe that 2015 will be the year that mobile payments will be in the hands of consumers across Europe," Visa Europe executive Sandra Alzetta said in a release. "Tokenisation is one of the most important technologies to emerge in digital payments and has the potential to start a whole new chapter in the kinds of products that are developed."

Tokenization — substituting a new, relatively meaningless identifier in place of a consumer's actual account information — is not a new concept for payments, but the launch of network-level tokenization with Apple Pay brought it into the brick-and-mortar world. Credit card tokenization was traditionally an online-only affair and token vaults, databases that map tokens to credit card numbers, were maintained by payment gateways.

Apple worked directly with credit card networks like Visa and American Express to move tokenization to their end of the chain. During Apple Pay transactions, tokens are translated into credit card numbers by the payment network, meaning that only the consumer's bank and the payment network have information about both the person and the transaction.

In addition to the obvious privacy benefits, network-level tokenization also provides significant security enhancements. There is no risk of credit card numbers being stolen by breaching computer systems at merchants, for instance, and tokens can easily be revoked and re-issued in the event of a lost device without altering the customer's account number.

While network-level tokenization is now part of the EMV payment specification, Apple was the first mobile payment provider to embrace it and is thought to have been a catalyst for its implementation. American Express and Mastercard have yet to announce similar European rollouts, but they are likely to follow quickly on Visa's heels.