Thanks to its convenience and security, digital plastic is emerging as the best alternative amid a lack of chips for physical cards.
One of the consequences of the pandemic has been disruption to several global production chains, including chips or semiconductors, which are essential to activate almost any electronic device, from smartphones to cars.
Demand for chips is constantly growing due to increased remote working, online entertainment, and digital transformation, which has increased demand for phones and laptops. But complex production processes limit their availability.
This is a serious problem for the financial world, as an EMV chip is required to issue credit or debit cards. According to a study by ABI Research, issuers will be unable to issue some 700 millions of these cards to users during 2022.
Considering that paying with plastic is indispensable today, what’s the solution to this shortfall?
The answer is simple: digital cards. In a context of increasing digitalization of the financial sector, the crisis also represents an opportunity to continue transforming banking and payment methods. And issuing virtual products through tokenization plays a central role.
A payment token is a unique random code generated in real-time that provides data from a card or PAN (Personal Account Number). This virtual service is performed by companies that provide digital payment gateways to complete a transaction without the need for physical elements.
They offer greater security for the customer’s bank details, which aren’t required and therefore are never exposed.
NFC TOKENIZATION FOR DIGITAL WALLETS
Contactless technologies associated with virtual cards make it even easier to simplify financial transactions using mobile eWallets.
It should be noted that a wallet can have different tokens associated with it since they are unique to each transaction and device; this offers greater security and also means their use is unlimited.
Financial institutions benefit exponentially from tokenization, for both cards and digital wallets.
First, it offers the customer greater security by not exposing their bank details to potential fraudsters. At the same time, companies have better sales prospects because fewer transactions are rejected for possible fraud.
It also greatly improves the user experience (UX) since it is a relatively fast payment process with fewer verification steps for each purchase, which increases customer satisfaction and loyalty.
In addition, the token service is free of charge.
Now that e-commerce sales are on the rise globally and digital entertainment apps like Netflix and Amazon require digital payment methods for their subscriptions, it’s important to offer customers more options.
The semiconductor shortage isn’t expected to be resolved in the coming months, so it’s important to find a viable solution to prevent the financial sector from being affected.
Card tokenization seems to be the best option in this scenario and supports the continued drive to digitalize payment methods.