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CMSPI – IAC State of the Industry Report
CMSPI – IAC State of the Industry Report
What is a BIN?
Primary concerns – many of which remain 118 - were based on: The potential departure from the bank and merchant being able to identify all networks available for a transaction; The potential departure from the bank and merchant being able to utilize all available networks in each payment environment; 1 2
Global network competitors being able to see all tokenized volume a merchant selects to route to their network via the transaction flowing through the network token vault; and Potentially losing control of the full end-to-end transaction due to the global network token vault manager being involved in most tokenized transactions.
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Figure 3.2 – Bank Identification Number (BIN) Overview
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2. Digital Wallet Network Access Ensuring flexibility and choice in all transaction environments is critical; however, it can be even more complex to understand routing options for digital wallet transactions due to their tokenization structures. In many digital wallet NFC-based transactions, the original card credentials are masked by a Device-PAN, which is a network-tokenized value of the customer card credentials stored in the Pay wallets (i.e. Apple Pay, Google Pay, Samsung Pay). This is notable because visibility into the underlying cardholder credentials is important for merchants managing the customer experience, including refunds and returns, selecting which partner to manage the transaction if the merchant is operating in a multi-acquiring environment, and determining over which network to send the transaction. Related to this last point and as discussed in Section 3.3, individual card network rules largely dictate which of these digital wallet transactions are classified as card-present or card-not-present – which have differing cost and liability structures – and may factor into whether a merchant elects to enable NFC digital technology at the point-of-sale compared to other technologies, such as QR codes. Further evidence of dual network routing challenges for digital wallet transactions surfaced in a 2024 study conducted by Valdani, Vicari & Associati (VVA) and issued by the European Commission. 119 119 The VVA report can be found here: According to the report (at pg. 14), a stakeholder representing payment service providers noted that international card schemes – who often serve as the token service provider – may make ‘technology available for domestic card schemes to effectively co-badge within digital wallets, however, this is subject to the domestic card schemes complying with the operating methods of tokenization and is subject to the terms and capabilities of the wallet provider.’ The report highlights Italy as an example of a geography in which it is not always possible for consumers to add a co-badged card’s payment application of their choice in their mobile wallets, citing the main issue as cross-border “Pay” wallet reliance on international card schemes’ tokenization technology solutions, as well as those wallet transactions being subject to card network rules. The report acknowledges that a domestic card scheme further confirmed: “that not all mobile payment solutions allow the digitization of co-badged cards for all the schemes supported by the physical card.” Another obstacle to merchant routing choice mentioned in the paper (at pg. 119) by a merchant stakeholder is that some- times the merchant may not be aware of the multiple application identifiers on a card if it is not obvious that they are both available for a mobile wallet transaction. This could result in a ‘potential violation of the right of the merchant to set a priority selection in the context of payments made through mobile wallets when only one brand or application is sent to the payment terminal at POS.’ These assertions from the European Commission report are notable as they provide important context to the at-market challenges merchants and service providers face in ensuring dual network routing is made available and is visible to all pertinent transaction stakeholders for digital wallet environments that are rooted in international card scheme constructs.
Many of the concerns from the early days of network tokens persist today, encouraging merchants and other industry stakeholders to explore the potential pros and cons of tokenization. KEY STAKEHOLDER CONSIDERATIONS In this section, we highlight some of the key commercial and customer experience considerations related to payment network token adoption. 1. Card Network Access One of the main commercial concerns U.S. merchants have around payment network tokens is the ability to access competing debit networks on a tokenized debit transaction. With the global payment card network managing the token vault – where the token credentials are mapped to the underlying payment card account details – merchants and their acquirers risk losing visibility into the Primary Account Number (PAN), which has historically been used in non-tokenized transactions to identify the network options a bank has enabled on a particular debit card product. From this information, the merchant selects and coordinates with their acquirer their preferred network over which to route the transaction. Ensuring unfettered access to this decision is important to merchants because of the variance in cost structures, liability frameworks, performance, and availability of each individual debit network, which are all factors considered by merchants when selecting how to optimize debit transaction routing.
118 Debit Network Alliance meeting - October 14, 2020 (federalreserve.gov)
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