• Fréderic Frizzarin, Head of Pre-Sales, Merchant Services at Worldline


• 30.11.2023 11:15 am
#tokenization #payments

In the modern digital economy, card-not-present (CNP) transactions have become commonplace. However, these transactions bring with them the significant threat of payment card fraud and data breaches. A promising solution to this problem is on the horizon: network tokenisation. This innovative technology bolsters the security of digital commerce transactions by ensuring the safety of shared and stored data. It achieves this by substituting sensitive Primary Account Numbers (PANs) with highly secure identifiers known as tokens. Major card schemes such as Visa, Mastercard, and American Express issue these tokens under network tokenisation, differing from PCI tokenisation where acquirers or payment service providers handle token issuance.

This article will delve into network tokenisation and discuss its workings, the benefits it offers, and its pivotal role in ensuring compliance with the Payment Card Industry Data Security Standard (PCI DSS). Furthermore, we'll highlight its potential to revolutionise the entire global payments landscape. These discussions underscore the importance of understanding network tokenisation and its implications for the future of digital transactions.

Recurring Payments Made Easier with Improved Authorisation Rates

Without network tokenisation, customers subscribing to services can encounter issues when their card expires or is lost. In these circumstances, they are required to input their card details again following any payment failures. Network tokenisation, however, provides a sophisticated solution to this problem by ensuring that customers don't need to update their payment information each time they receive a new card. Instead of linking to the physical card, this method connects to the customer's card funding account, allowing for uninterrupted and hassle-free recurring payments. This improved access to payment credentials streamlines the process, minimises payment declines, enhances authorisation rates, and guarantees smooth payments.

Furthermore, businesses contemplating the integration of this innovative technology can enjoy significant benefits over traditional PANs, particularly in terms of improved authorisation rates. For instance, data shared with Visa demonstrates a notable 5% rise in authorisation rates (source: VisaNet Data Feb-Apr 2022 Issuer region: Europe; Visa Token transactions compared to PAN-based transactions online). Adopting network tokenisation not only bolsters security but also facilitates a seamless and efficient payment experience, leading to more satisfied and happier customers.

Avoiding Fines and Minimising Costs

Achieving merchant compliance involves adhering to numerous rules and bearing related costs. Among these, protecting sensitive customer data stands as a challenging yet essential duty. Complying with data security standards set by GDPR and PCI DSS can be costly and resource-demanding. Non-adherence to these standards could even result in severe legal consequences for merchants. However, network tokenisation simplifies the journey towards robust compliance by eliminating the need to handle sensitive data, thereby removing a significant obstacle. When incorporated into a merchant's payment infrastructure, network tokenisation aids in optimising resources, both in terms of time and money.

Moreover, the benefits of network tokenisation extend beyond compliance. Card schemes offer a reduced interchange rate for certain card categories labelled with network tokenisation. This implies that merchants will incur lower costs for transactions involving network tokens, effectively reducing costs while ensuring secure transactions and maintaining compliance. While international e-commerce giants, due to their large volume of online transactions and high recurrence, can expect substantial ROI, smaller merchants might not see immediate returns due to initial setup costs. However, all merchants stand to gain from the operational advantages of network tokenisation. Globally, the adoption of this technology is growing rapidly, with more than one in three transactions already tokenised (source: VisaNet September 2023). This trend indicates that merchants of all sizes may soon adopt this cutting-edge technology, given its evident benefits.

Employing Rich Data Sets for Strategic Business Decisions

Network tokenisation swaps out confidential card details with secure tokens, retaining crucial data without jeopardising security. This method helps businesses manage customer transactions and preferences without accessing their actual card details. By studying these tokens, companies can spot patterns in consumer spending. For instance, if a customer frequently uses a certain token linked to a payment method, it indicates a preference for that mode. These findings allow companies to improve their marketing strategies. When a customer consistently shops within a particular category, the company can tailor ads or offers specifically for that category.

From Risk to Resilience: A Journey of Enhanced Security and Fraud Diminution

Network tokenisation not only offers robust fraud protection by making intercepted tokens useless to unauthorised parties but it also helps in detecting suspicious activities that may indicate fraud. These tokens, which bear no resemblance to the original data and appear as random strings, provide a strong defence against fraud. This is particularly crucial in the context of increasing CNP transactions that are more susceptible to fraud due to the lack of physical card verification. Additionally, unusual token usage or atypical patterns can serve as warnings of possible fraudulent activity. According to a report by VisaNet in March 2022, network tokenisation has led to a reduction in fraud by up to 50% in Europe. Such insights enable companies to take necessary corrective measures while maintaining customer privacy.

The rapid expansion of digital commerce has driven consumer expectations for faster transactions, enhanced convenience, better value, and increased options. Network tokenisation actively addresses these demands, fostering customer loyalty in the subscription-based economy. It elevates conversion rates, authorisations, fraud prevention, and cost savings. By offering security, efficiency, and a competitive advantage, network tokenisation becomes an appealing solution for merchants aiming to thrive in the digital commerce landscape.