There is tremendous pressure on businesses to create a seamless, end-to-end payment experience for consumers. In our world of same-day shipping and delivery and pay anywhere capabilities, it is up to the business to keep consumers engaged while ensuring security.
One of the safest ways businesses can keep consumer payment information safe is with tokenization. Tokenization takes information such as card data and address and encrypts it into a token to be used anytime a consumer purchases with that business. This is great for recurring transactions or consumer purchases made with the same vendor over time.
Over time tokenization has evolved. Network tokenization has emerged to overcome some of the previous restrictions associated with third-party tokenization.
What's the tokenization difference?
In third-party tokenization, consumer information is encrypted when a consumer initiates a transaction with a business. For example, say someone purchases a monthly gym membership:
They enter their payment information (credit card number, address) through the website's payment form.
That information then travels to the payment provider. With Worldlines's tokenization service, that information triggers the creation of a payment profile and stores it on our PCI Level 1 server.
A token is created in conjunction with that profile and is sent back to the gym. This same token will be used every month when the membership fee needs to be renewed. The member never needs to re-enter their payment information.
Since the payment information is securely stored on Worldline's secure server, it limits the risk of fraud and keeps the business out of the PCI scope. That token is only meaningful to that business and their payment provider, and once it gets to the card network or issuing bank, the encryption is no longer valid.
If the card in question was expired or some details changed, the token would be invalid, and the gym owner would be left chasing down the current information.
With Network Level tokenization, a consumer's primary account number (PAN) is replaced with a unique EMV token. The card networks have worked together to allow this type of token to be used across the payments ecosystem, from the moment a transaction is initiated until it reaches the issuing bank. There is not a moment when data is unencrypted.
Network tokenization is also built similarly to card or account updater services, where a change in account details will automatically update to that corresponding network token. Going back to our gym example, expired card details will be automatically updated to that token, saving the gym owner from tracking down the new information. This helps improve authorization rates.
Why does network tokenization matter in e-commerce?
Reducing false decline rates
Reducing false decline rates should be music to the ears of any online business, and for a good reason. False declines are expected to cost companies $433 billion globally in 2021- a staggering number given that losses from e-commerce fraud in 2021 will be nearly 70 times less than that.
Network tokenization helps eliminate false declines due to expired or updated credentials. Any updates are automatically pushed to that specific token in real-time through the card networks and issuing banks.
Increased fraud protection
Despite the best fraud defence efforts of businesses, hackers still find ways to breakthrough. And as more people choose digital avenues to make purchases, fraud rates will only continue to rise without a viable solution.
The end-to-end encryption offered by network tokenization is a step in the right direction for a new era of fraud management. The network token replacing the PAN is undecipherable at every level of the transaction lifecycle, the issuer, merchant, gateway, and acquirer. The risk of falling victim to a data breach is significantly decreased as the data will be useless to prying eyes.
A smoother payment experience
By helping to eliminate the false declines made by expired card-on-file credentials, network tokenization creates a smoother checkout process between businesses and consumers. Businesses will no longer have to request verification methods such as AVS and CVV, speeding up the checkout process and eliminating the possibility of forgotten or expired credentials.
New services such as Secure Remote Commerce (SRC) are enhanced and supported by network tokenization. SRC provides a unified shopping experience from Visa, Mastercard, AMEX, and Discover, and with network tokenization, the payment experience is more seamless and secure than ever before.
While still relatively new, network tokenization is well poised to be one of the next best technologies in creating a seamless and secure payment experience. Tokenization is one of the safest ways to transport payment data, yet many businesses have yet to adopt it. If you are curious to learn more about tokenization or other payment tools, talk to our payments experts.