Today’s milestone represents the impact that tokenization has had on the entire payments ecosystem since we introduced the technology 10 years ago. Tokens have changed the game – securing online payments and paving the way for more innovations – from tapping to pay on the phone to enabling a future where we have more control over our data in the age of AI.

Jack Forestell, Chief Product Officer at Visa

Visa’s tokenization replaces sensitive card information with a unique digital identifier, enhancing payment security. As of now, 29% of all Visa transactions use tokens, leading to a 28% reduction in fraud and a six-basis point increase in global payment approval rates. Over 8,000 issuers and 1.5 million merchants are enabled for tokenization, with daily transactions continuing to grow.

Over the last 10 years, Visa has invested in scaling its token infrastructure to power safer and more convenient digital commerce for consumers and merchants here in Europe, and in nearly every market across the world. As AI begins to create more personalized experiences online, we’re using our token expertise to give people more control over their payments data.

Mehret Habteab, Senior Vice President of Product and Solutions at Visa Europe

Visa is set to introduce data tokens to provide consumers with greater control over their data. These tokens will enable users to view, consent to, and revoke data sharing directly from their banking apps, powered by AI for seamless personalization and security.

Pilot Details

• Enhanced Payment Controls: The first pilot enhances SWIFT’s existing Payment Controls service using AI models to detect fraud more accurately by analyzing historical transaction patterns. This will be tested with live customer data.
• Data Collaboration and Federated Learning: The second pilot involves 10 leading financial institutions, including BNY Mellon, Deutsche Bank, DNB, HSBC, Intesa Sanpaolo, and Standard Bank. This experiment focuses on using AI to analyze anonymized data from various sources securely, improving global fraud detection capabilities.

Impact on the Industry

Fraud cost the financial industry USD 485 billion in 2023. The pilots aim to reduce these costs significantly and support the G20’s goal of speeding up cross-border payments.

AI has great potential to significantly reduce fraud in the financial industry. That’s an incredibly exciting prospect but one that will require strong collaboration. Swift has a unique ability to bring financial organizations together to harness the benefits of AI in the interests of the industry, and we’re excited by the potential of both of these pilots to help further strengthen the cross-border payments ecosystem.

Tom Zschach, Chief Innovation Officer at Swift

SWIFT has developed an AI governance framework ensuring accuracy, explainability, fairness, auditability, security, and privacy, aligning with global standards such as ISO 42001, the NIST AI Risk Management Framework, and the EU AI Act.

Insights from Key Figures Involved

Combatting fraud successfully will require industry collaboration, collective action, and strong leadership from operators like Swift. We’re excited to help lead the first wave of innovation in this space and look forward to seeing even more banks join the initiative.

Isabel Schmidt, Executive Platform Owner, Payments Enablement at BNY Mellon Treasury Services

Our passion for holistic payment solutions is founded on expertise, technology, and innovation; not only in terms of our own strategic product development, but importantly through our strong dedication to drive partnership and collaboration across the market. Through these industry initiatives, we have the potential to enhance our ability to detect fraud and reduce operational costs, whilst delivering a premium customer experience and contributing towards a more secure market environment.

Ole Matthiessen, Global Head of Cash Management & Head of Corporate Bank APAC, Middle East & Africa at Deutsche Bank

Building financial resiliency and strengthening risk management is a key priority for our clients and they are looking to us to help them better manage uncertainty and threat through our solutions while supporting their businesses to grow and transform. By utilising new technology and collaborating across the industry to fight fraud, we are helping protect our customers, our data and the bank.

Manish Kohli, Head of Global Payments Solutions at HSBC

Extending and strengthening the collaboration of anti-fraud experts and the exchange of data also at an international level will improve the prevention of and fight against fraud.

Enrico Canna, Head of Anti-Fraud & Customer Protection Center at Intesa Sanpaolo

Details of the Agreement

• Instant Payments: The agreement enables Banque Raiffeisen to send and receive instant payments as required by the EU’s Instant Payments Regulation.
• Services: Worldline will provide TIPS connectivity, transaction sanctions screening, and stand-in account verifications.
• Enhanced Capabilities: Worldline offers end-to-end solutions for instant payments, improving API connectivity and minimizing integration complexities, ensuring banks can serve clients 24/7/365.

We have signed this agreement with Worldline, a valued partner for the clearing and settlement of Sepa payments for over 15 years, because we are confident that this allows us to smoothly implement instant payments in line with the regulatory requirements and deadlines. With instant payments we intend to complete the range of payment services we offer to our clients and be prepared for the future developments in peer-to-peer and point-of-sale payments.

 Eric Peyer, exco member at Banque Raiffeisen

This initiative aligns with the European Council’s regulatory requirements, which aim to ensure credit transfers are processed within 10 seconds, thereby promoting instant credit transfers and reducing the risk of fraud. This regulatory push underscores the importance of adopting advanced payment technologies to meet evolving customer expectations and regulatory standards.

This announcement represents our first cloud-based instant payments client in Luxembourg. Through our offering, Banque Raiffeisen will benefit from a comprehensive instant payments solution and a fast time to market that provides added value.

Sheri Brandon, CMO of financial services at Worldline

Awareness and Implementation

• High Awareness: 81% of large companies have at least basic awareness, with 50% having thorough knowledge of digital ID technology.
• Active Integration: 42% are actively integrating digital ID solutions, 31% are in early stages, and 17% are developing strategic plans.

Regional Insights

The UAE shows higher integration rates, while the US and Europe are more cautious, with 37% and 39% in the integration phase, respectively.

Forrester emphasizes the need for a hybrid approach to digital IDs and recommends that regulators provide frameworks ensuring interoperability, security, and privacy.

Motivations and Challenges

• Motivations: Organizations are motivated by the need to enhance security, improve customer experience, and comply with regulatory requirements.
• Challenges: Key challenges include integration with existing systems, ensuring user privacy, and managing the costs associated with implementing digital ID technology.

Technological Adoption

• AI and Biometrics: Many companies are exploring AI and biometric technologies to strengthen their digital ID solutions.
• Interoperability: There is a focus on ensuring that digital ID systems can work seamlessly across different platforms and jurisdictions.

The study suggests a positive outlook for the adoption of digital ID technologies, with continued investment and innovation expected in this area. Companies are increasingly recognizing the importance of digital identities in securing transactions and enhancing operational efficiency.

Key Features of the Partnership

• Digital Transformation: The agreement will help select merchants and CPG companies leverage SKUx’s payment-based offer solutions for various use cases such as customer acquisition, loyalty programs, and consumer care and recovery.
• Seamless Payments: SKUx’s Digital Payments Platform enables real-time, branded Visa digital payments delivered directly to mobile devices, ensuring a seamless consumer experience.
• Fraud Reduction and Efficiency: The platform transitions from physical to digital processes, significantly reducing costs, effort, and fraud. It supports real-time transparency through enterprise distributed ledger technology (DLT).

The SKUx platform is already utilized by leading CPG brands, achieving up to 85% reductions in paper checks with near real-time digital delivery of customer payments. This partnership will drive value creation in B2B and B2C payment flows, enhancing customer interactions from acquisition to purchase.

This collaboration between Visa and SKUx represents a significant advancement in digital payment solutions, promising enhanced efficiency, reduced fraud, and a seamless experience for both merchants and consumers.

Key Products

• Visa Flexible Credentials: Allows a single card to toggle between debit, credit, ‘pay-in-four’, or rewards points.
• Mobile Enhancements: Includes Tap to Confirm, Tap to Add Card, and Tap to P2P, improving security and convenience.
• Visa Payment Passkey: Replaces passwords with biometric authentication for online payments.
• Pay By Bank: Utilizes Tink’s technology for account-to-account payments, enhancing security and fraud detection.
• Data Tokens: Allows consumers to consent to data sharing for personalized offers and revoke access via their banking app.

Jack Forestell, Visa’s Chief Product and Strategy Officer, emphasized that these innovations represent a shift towards more customized, convenient, and secure digital payment experiences:

The industry is at a pivotal point – new technologies like Gen AI are rapidly shifting how we shop and manage our finances. We’re announcing the next generation of truly digital-native payment card experiences. Today we unveiled new card features and digital innovations that will bring consumers into a more customized, convenient, and secure future.

Jack Forestell, chief product and strategy officer, Visa

Visa Payment Passkey, for instance, simplifies online payments by confirming identity without interrupting the checkout process, enhancing security while reducing friction.

Visa’s new products and services will be rolled out over the coming year, with initial deployments in Asia and the US, and further expansions planned globally. These innovations aim to set new standards for digital payments, offering enhanced security, efficiency, and user experiences.

During the test, BBVA utilized a proprietary architecture developed in collaboration with the Quantum Computing team at digital transformation companies VASS and AWS. They used Qiskit software to distribute the execution of quantum algorithms across several classical compute servers, thereby enhancing their computing power to simulate 38 qubits. This scale of quantum simulation is challenging to achieve with a single classical computer and allows for solving more complex problems.

Current quantum computers are experimental and, while they might not seem to pose much of a threat today, they may do so in the near future. With that in mind, we must protect the confidentiality of our data and communications until that future arrives.

Escolástico Sánchez, leader of Quantum Discipline at BBVA

Innovative Approaches to Security and Problem-Solving

BBVA is also a founding member of the Quantum Safe Financial Forum (QSFF), working alongside European and US financial firms to develop secure technologies against quantum computing threats. This forum, supported by Europol’s European Cybercrime Centre (EC3), fosters collaboration to build resilient financial systems.

The success of this pilot is not only a technical achievement but also a strategic one, showcasing BBVA’s capabilities in quantum computing. It demonstrates that classical computers can be effectively used to test quantum algorithms on a large scale in a controlled, noise-free environment. This advancement holds the promise of applying these technologies to real-world financial problems as quantum computing hardware continues to evolve.

Expanding Open Banking Across the Globe

The report details a significant uptick in Open Banking adoption, with a notable rise in the number of products available that utilize the following:

• direct-from-bank account payments
• business capital solutions
• enhanced credit scoring methods

At least 987 products are now leveraging Open Banking for lending purposes worldwide, indicating the widespread acceptance and implementation of this technology.

New regulations are being introduced across various regions, including Europe, the UK, Brazil, Australia, and New Zealand, to further promote Open Banking initiatives. These regulations are expected to continue boosting innovation, with 43 countries now moving towards broader Open Finance frameworks to provide even greater data accessibility to customers.

The adoption of Open Banking has allowed financial institutions to explore new revenue streams through the sale of APIs and has enhanced their ability to offer more personalized and secure services. The report also highlights how banks are increasingly adopting identity verification services to ensure safer financial transactions.

This method results in substantial operational costs and significant annual fraud losses, totaling approximately $1.1 billion globally. The introduction of the VAAI Score mitigates these impacts by providing real-time risk assessments that help prevent fraudulent transactions.

Key Features and Benefits of the VAAI Score

The VAAI Score offers several groundbreaking features:

• Real-Time Risk Scoring: The system can assign risk scores to transactions in just 20 milliseconds, enabling immediate response to potential threats.
• Reduction in False Positives: Visa has optimized the VAAI Score to reduce false positives by 85%, focusing specifically on signals unique to enumeration attacks for more accurate detection.
• Training and Features: The model is trained on more than 15 billion VisaNet transactions and incorporates six times the number of features compared to previous models, enhancing its ability to scrutinize suspicious transactions effectively.: 

Enumeration can have lasting impacts on our clients and there’s an immediate need for tools that can better detect and prevent these attacks in real-time. With the VAAI Score, our clients now have access to real-time risk scoring that can help detect the likelihood of an enumeration attack so issuers can make more informed decisions on when to block a transaction.

Paul Fabara, Chief Risk and Client Services Officer at Visa

Michael Jabbara, SVP Global Head of Fraud Services at Visa, also highlighted the advanced technology’s role in safeguarding digital finance: 

With access to advanced technology, fraudsters are monetizing stolen credentials faster than ever before. Enumerated transactions impact the entire ecosystem, and with the VAAI Score, we’re giving our clients a sophisticated tool that can help prevent cardholder accounts from being compromised and stop fraudulent transactions before they happen.

Growth Driven by A2A and Open Banking

The impressive growth in instant payments is primarily fueled by the rise of A2A wallets, such as iDEAL and Twint, and the expansion of Open Banking. These platforms facilitate direct bank account transactions, sidestepping traditional card payments, thereby reducing costs for merchants and simplifying the payment process for consumers. Instant payments are defined by their rapid processing time, where funds are received in under 10 seconds, with confirmation available within a minute.

Open Banking is particularly significant as it allows digital wallets to utilize bank payments without individual bank partnerships, which broadens access and utility. The report highlights that consumer transaction volumes through these instant payment methods are projected to grow from 252 billion transactions in 2024 to over 600 billion by 2028. This increase is also supported by the popularity of A2A wallets for peer-to-peer transfers and informal lending.

Michael Greenwood, the author of the report, emphasizes the advantages for merchants, stating:

To increase adoption, we recommend that merchants incentivise consumer use by offering purchase discounts when using bank-linked payments. By encouraging adoption, merchants will benefit from lower fees for each transaction in comparison to cards.

Despite these advancements, the report notes the necessity for increased merchant acceptance of bank payments at both physical checkouts and online to overcome obstacles to broader consumer adoption. Addressing these challenges is important for the continued expansion and acceptance of instant payments.