Palo Alto-based Token launched a new payment rail to help banks comply with Europe’s Revised Directive on Payment Services (PSD2), a framework that provides the legal foundation for a European Union-wide, single market for payments.
The new network, which is based on programmable tokenization technology, integrates with a bank’s core APIs, policies and procedures. Token helps banks monetize their APIs by offering access to third parties while limiting disintermediation and security risks associated with opening its APIs.
Token CEO Steve Kirsch created the company to “meet the needs of payments in the digital age.” Kirsch noted that a bank’s “over-reliance on out-dated networks and third-party service providers is not only commercially counterproductive, [but] also a security nightmare.”
Token uses smart tokens, a digital representation of money, to secure the transaction flow and keep banks in control of the entire process. Here’s how it works:
- When the user makes a purchase, the merchant requests a token. The user’s bank processes the request through its Token Layer, confirms the user’s credentials, and approves the purchase.
- The user receives and digitally signs to accept the token on their mobile device. The bank receives and confirms the user’s signature.
- The approved token is sent to the merchant.
- The merchant sends the bank the Token ID and payment request.
- The transaction settlement occurs instantly through Token if both banks are Token-enabled. Otherwise, it goes through the bank’s legacy rails.
Token was founded in 2015 by CEO Steve Kirsch. The company debuted at FinovateSpring 2015 (video below) and also appeared at FinDEVr San Francisco 2015 where the company’s VP of Development Bill York gave a presentation titled, The Future of Payments is Now.