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Mastercard will announce in a conversation with CNBC on Tuesday that it will tokenize all cards issued across its European network by 2030.
This means that instead of the 16-digit card number we are used to using for transactions, a randomly generated “token” will be used.
The company says it is working with banks, fintechs, retailers and other partners to phase out manual card entry in European e-commerce transactions by 2030 and introduce a one-click button across all online platforms.
Mastercard says this will help protect consumers' cards from fraud.
Mastercard is introducing Passkey as an alternative to passwords, so users don't have to keep entering their password every time they make a payment.
Customers will also be able to use fingerprint biometric authentication to make one-click payments at checkout.
With tokenization, cards stored on a merchant's page or digital wallet will be automatically updated when they are replaced or renewed, regardless of where they are stored.
Mastercard says that achieving 100% tokenization across its e-commerce sites will dramatically reduce fraud rates.
According to market research firm Juniper Research, losses from online payment fraud are expected to exceed $91 billion by 2028, totaling more than $362 billion globally over the next five years.
According to Mastercard, tokenization adoption is growing at a rate of 50% annually and now secures approximately 25% of e-commerce transactions worldwide across its network.
Mastercard said it was rolling out the change in Europe because the continent has long been a leader in payments innovations such as contactless payments and online banking, allowing bank customers to share account data to access new financial products.
“In Europe, tokenization is gaining momentum across the ecosystem, driven by the benefits of convenience and reduced fraud rates,” Valerie Nowak, executive vice president of product and innovation at Mastercard Europe, said in a statement.
“We believe achieving this vision by 2030 will be a win-win for shoppers, retailers and card issuers.”
Payment methods have changed pretty dramatically over the decades, from the introduction of the first credit cards in the 1950s and 1960s to the widespread adoption of the internet in the early 2000s and the shift to online payments.
When credit cards were first introduced, bankers had to check card numbers against a register of invalid numbers or call the issuing bank to verify that the person making the payment was who they said they were.
So-called ZipZap machines, which printed card numbers on a carbon paper bag, were the primary way to pay with a credit card at the cash register.
That was until the 1970s and 1980s, when magnetic stripes and electronic payment terminals came into vogue.
Later, cards with microchips were introduced that stored data such as the card's owner, number, and expiration date.
Mastercard believes the move to this new “embedded” payment system will be as dramatic a change as the transition to chip and PIN currently in widespread use in developed countries around the world, or the adoption of contactless payments.
The company claims that its technology makes paying for online purchases as smooth as contactless payments in stores, meaning consumers will be able to pay with one click on any device, including smartwatches, home assistants and even cars.
For example, Mastercard has partnered with Mercedes-Benz to allow the automaker's customers to use in-car fingerprint sensors to make digital payments at more than 3,600 service stations across Germany.
