Innovation in payments is constantly evolving. And one of the big topics in the industry right now is network tokens. Adel Naamne of Checkout.com discusses the benefits that network tokens can offer businesses.
Payments are constantly changing and innovating. One such current innovation is network tokens.
Network tokens replace sensitive card data without exposing actual account details. Unique numeric identifiers act as a substitute value for a primary account number (PAN) throughout the payment chain. Thus, the account number and expiration date on the front of a card are never revealed.
Network tokens therefore increase the security of card payments. But they also have other advantages for companies. Here are some ways network tokens can benefit a business.
Keep repeating your business
When expired, lost, stolen, or when damaged credit and debit cards are replaced by customers, card information stored with companies will be obsolete. This information must be manually replaced by the customer with the new card information. Recurring payments and subscriptions often fail because customers forget to do so. The result is unintended rolling.
Of course, customers are encouraged in various ways to keep their information up to date. But, despite this, unintentional churn still accounts for 20% to 40% of all churn among subscription companies.
A more reliable solution is network tokenization. As network tokens are updated in real time, customer payment details are always up to date. Additionally, rules can be applied regarding where, when, and how network tokens are used. So if a token is compromised with one business, other businesses will not be affected and they can continue to process payments related to that card. The chances that businesses always have the correct card number are increased and recurring revenue becomes more reliable.
Increase conversion at checkout
Any extra steps at checkout increase friction for customers. And increased friction can cause customers to abandon purchases. Having a customer card on file eliminates the tedious process of entering card information during the checkout process.
One-click payment options at checkout that are powered by network tokenization improve the user experience by making it smoother and removing any obstacles that might get in the way of a sale. Payments made this way are also more secure. The result? Higher conversion rates.
Improve authorization rates
Our data shows that two-thirds of online retailers operate with authorization rates below 89%. This means there is plenty of room for improvement. And, with that improvement will come increased revenue.
But how do you validate the authenticity of a customer within the payments value chain? How do businesses know that a customer is who they say they are and that their card details are legitimate? And all players in the payments value chain—card issuers, acquirers, and merchants—try to balance a seamless customer experience with robust security and regulatory requirements.
Of course, tokenization as a payment concept is nothing new. However, while PCI tokenization is used for additional security through tokenization information such as the PAN number, this happens between merchants and their acquirers or PSPs. Network tokenization, on the other hand, includes card issuers. The card schemes issue the tokens and these tokens are shared with the issuers. This gives them greater visibility into merchant-side token activity.
Once the card schemes have issued the tokens, they are shared with issuers, giving them greater visibility into merchant-side token activity. Issuers gain confidence because of the increased control and visibility it gives them. Therefore, they are more likely to approve a transaction. This means better authorization rates.
Reduce fraud and save costs
In 2020, approximately $35.5 billion was lost to cardless fraud. In fact, 41% of merchants told us that managing fraud was their biggest challenge in 2022. But keeping fraudulent customers out while letting legitimate customers through is a delicate balance. law. Falsely refusing payment from a customer is a costly mistake to make.
Tokenization gives each payment increased security. This has the potential to reduce the fraud-to-sales ratio, thereby improving payment success rates. Moreover, even if criminals steal tokenized data, they cannot use it. Thus, phishing and malware attacks are neutralized.
Plans have been announced by Visa to charge off-network token transactions at a higher rate. Businesses can avoid this cost by increasing their adoption of network tokenization.
There is also an increased cost associated with the security burden of storing sensitive cardholder data. Network tokenization reduces security compliance costs by reducing the scope of PCI DSS.
The additional merchant-specific information that is required with the token to make a payment renders the details of the stolen token unnecessary. As a result, data breaches and associated costs (loss of revenue, incident response and breach notification) are more successfully avoided.
Realize the benefits of network tokens
As digital commerce grows, customers expect increased speed, convenience, value and choice. Network tokenization is one way to achieve this through increased subscription economy recurring business activity, improved conversion, better authorization rates, reduced fraud rates, and cost savings. costs.
For advice on the best network tokenization strategy for your business, contact our team of payment experts.
About Adel Naamneh
Adel is a strategic advisor helping businesses thrive in the digital economy. He is part of the Checkout.com team that provides innovative solutions, valuable insights, and expertise that merchants can rely on in an ever-changing world. Adel Naamneh is Vice President of Global Strategic Solutions UK for Checkout.com.
Checkout.com is a global payment solutions provider that helps businesses and their communities thrive in the digital economy. It offers innovative solutions that adapt to your needs, valuable insights that help you better manage your payments performance, and expertise you can rely on as you navigate the complexities of an ever-changing world.