The Clearing House has expanded the adoption of its Token Service, a bank account tokenization solution designed to protect information associated with account numbers and mitigate risks associated with fraud and data breaches.
When a client links their account information with a third party, tokenization replaces sensitive payment account information with a “token,” protecting consumers by concealing their actual bank account numbers so they are not shared. The service, which is available for ACH transactions on the EPN network and for instant payments on the RTP network, is being adopted more broadly by banks, which is paving the way for new applications for payments, data security and fraud risk mitigation.
“With expanded adoption of the Token Service, we are providing banks and their customers a safer, more flexible way to store and use account information,” The Clearing House Senior Vice President, Product Development, Jeff Williams said in a release. “By embedding security at the network layer, we’re reducing the risk of fraud while opening the door to new, innovative applications across the payments ecosystem.”
The Clearing House and participating banks have deployed tokens to improve security in open banking, where data aggregators and fintechs retrieve and store large volumes of consumer account data, according to a release.
In the past, “screen scraping” practices left sensitive account and payment initiation data exposed and at risk if compromised. The shift to API-based data sharing with customer-permissioned authentication creates a foundation for scaling tokenized account number distribution and empowering customers to periodically review permissions for third-party data access.
“At PNC, protecting our customers’ financial information is at the core of everything we do,” PNC Executive Vice President, Head of Retail Digital and Emerging Payments Strategy Natalie Talpas said. “By working with The Clearing House to expand the use of tokenization, we are providing consumers with greater security and control over how their account data is shared and used. This advancement not only helps reduce fraud but also builds the trust and confidence necessary for the continued growth of open banking in the U.S.”
By replacing account numbers with tokens, The Clearing House leaders noted the service “significantly reduces” the risk of bank account data being used for fraud or being exposed during data breaches.
“Tokenization represents an important step forward in protecting sensitive account data and improving the overall customer experience,” U.S. Bank Senior Executive Vice President and Chief Digital Officer Dominic Venturo said. “By adopting The Clearing House Token Service, we’re able to provide our customers with even stronger safeguards against fraud, while also enabling more seamless and secure ways to share their financial information. This innovation further strengthens trust with our customers for digital banking services, but also lays the foundation for new products and services that meet the evolving needs of our clients.”
Banks are now integrating directly with the Token Service for token issuance and working with third parties to distribute tokens on their behalf. This growing utilization of bank account number tokens will enable new applications, such as tokenizing “account-on-file” data held by large merchants and billers, entities that manage stores of account information, which heighten data breach risks.
The Token Service also offers a method to respond to fraud events such as data breaches. Tokens can be re-issued without closing or reopening the underlying account, avoiding disruptions for customers and reducing servicing costs for banks.