The Clearing House (TCH) announced that it is working with the US’s leading financial institutions to develop an industry wide dynamic credentialing solution to improve the safety and soundness of digital payments.
Established in 1853, The Clearing House (TCH) is the oldest banking association and payments company in the US. Association is a payments vocabulary word that has gone by the wayside in the wake of the Visa and MasterCard’s IPOs, but in this context, it means that TCH is owned by commercial banks.
And, not just any commercial banks, but the big ones that collectively hold half of the deposits in the US Member banks including: Banco Santander, Bank of America, The Bank of New York Mellon, BB&T, Capital One, Citibank, Comerica, Deutsche Bank, HSBC, JPMorgan Chase, KeyBank, PNC, RBS Citizens, TD Bank, UBS, U.S. Bank, Union Bank and Wells Fargo. (City National, Fifth Third Bank, First Citizens and M&T are not owners but have a shared board seat.) TCH provides payment, clearing, and settlement services on behalf of those banks that power about half of the ACH, funds-transfer, and check-image payments made in the US.
As a first step, TCH is developing a pilot program to demonstrate a solution that would foster an open standard solution that aims to enhance customer account information safeguards. The credentialing solution is being built to help protect customer account information by reducing storage of sensitive information, such as a customer’s card number, across multiple retailers, virtual wallet providers and others. The initiative is designed to ensure that solutions in mobile and other digital payment channels scale in a consistently safe and sound manner.
“Financial institutions have always been the stewards of safe and sound payment systems,” explains Richard Davis, CEO, U.S. Bancorp and chairman of The Clearing House. “As an industry, we want to do what we can to ensure that privacy and fraud protection are built into all types of digital payments.”
The pilot will test customers’ ability to use their mobile device to make a purchase within a mobile wallet and at the point of sale. The customer’s actual account number will be replaced by the issuing bank with a randomly generated temporary number, or dynamic credential, for processing the transaction. This protects a customer’s account information behind bank firewalls and lowers the potential for fraud in digital payments. Customer experience for payment transactions with mobile devices should not be impacted as the pilot is focused on the “behind the scenes” of a digital payment transaction.
“As the digital ecosystem evolves, broad adoption of digital payments will depend upon confidence in the security and storage of customer account information,” continues Paul Galant, CEO, Citi Enterprise Payments. “This initiative is designed to provide important new ways to protect customer account information and increase customer confidence in the security of the payment systems.”
The Clearing House will provide an update on the initiative as the pilot progresses. “The development of an innovative, safe and sound solution for digital payments is a natural evolution for The Clearing House,” concludes The Clearing House CEO James Aramanda. “For 160 years The Clearing House has focused on the safety and security of payments for all Americans. First with the development of a central clearing house, then the paper check, followed by electronic payments and now it is ready to ensure digital payments safety and security for future generations.”
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