NEW YORK – The Clearing House has announced the expanded adoption of its Token Service, which it described as a next-generation bank account tokenization solution designed to protect the information associated with bank account numbers and help mitigate risks associated with fraud and data breaches across the financial ecosystem.
“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 Clearing House said in a statement. “The service, which is available for ACH transactions on the EPN network and for instant payments on the RTP network, is now being adopted more broadly by banks, setting an industry standard and paving the way for new applications for payments, data security, and fraud risk mitigation.”
Improved Security
The Clearing House said that it 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.
“In the past, ‘screen scraping’ practices left sensitive account and payment initiation data exposed and at risk if compromised,” The Clearing House said. “The shift to API-based data sharing with customer permissioned authentication creates a natural foundation for scaling tokenized account number distribution and empowering customers to periodically review permissions for third party data access.”
‘Security & Control’
According to The Clearing House, tokens for bank account numbers deliver security and control, allowing customers and their banks to store account details more safely and manage when and how a token can be used for payments.
“By replacing sensitive account numbers with secure tokens, the service significantly reduces the risk of bank account data being used for fraud or being exposed during data breaches,” the organization stated.
Wider Bank Adoption and New Applications
The Clearing House added that 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 vast stores of account information, which heighten data breach risks,” The Clearing House stated.
Fraud Response
According to The Clearing House, beyond prevention, the Token Service offers a powerful method to respond to fraud events such as data breaches.
“Tokens can be re-issued without closing or reopening the underlying account, avoiding major disruptions for customers and reducing servicing costs for banks,” the organization said. “While other forms of account data masking exist, tokenization at the network level—where The Clearing House processes payments—offers a higher level of security. Tokens remain intact throughout the payment journey until they reach the network, where they are detokenized and can have bank-defined rules applied.”
