Network tokens explained

Imagine you’re the owner of a thriving online store. Exceptional reviews, loyal customers and constant growth. But there’s a persistent problem: card declines. Once-loyal customers find that their payment methods mysteriously stop working, carts are abandoned, and they start shopping elsewhere.

This scenario isn’t unique. Businesses everywhere grapple with payment failures due to expired or replaced cards. It’s a problem which causes businesses to lose out on thousands of pounds of revenue each year.

This is an area in which the choice of payments partner makes an enormous difference. Thanks to the power of network tokens, saved cards work seamlessly – even if a new card has been issued to that account. Cart abandonment drops, and customer complaints about payment issues virtually disappear.

What is tokenization? 

Tokenization is a cutting-edge security measure in digital payments. It relates to the process of replacing sensitive card data - specifically the primary account number (PAN) - with a unique string of numbers called a token. This token serves as a stand-in for the actual card details during transactions.

So how does it work? The token is used to process the payment, while the actual card data is stored securely elsewhere. Even if a hacker were to intercept the token, it would be useless without the corresponding decryption key.

As a result, tokenization significantly reduces the risk of data breaches and fraud. It allows businesses to handle payments securely without directly managing sensitive card information. This not only protects customers, and therefore the business’s reputation, but also helps businesses maintain PCI DSS compliance more easily, as they're not storing actual card numbers in their systems. Tokenization forms the foundation for more advanced solutions like network tokens, which could eventually solve soft payment decline issues entirely.

What are network tokens?

Network tokens take tokenization one step further. They are created and managed by the card networks themselves, such as Visa, Mastercard, American Express, and others. Unlike standard tokens, which are typically confined to a single merchant's ecosystem, network tokens have broader functionality and intelligence.

A network token is a secure method for processing card payments, designed to support businesses in delivering a frictionless payment experience by keeping customer payment data safe. 

In essence, network tokens are virtual payment cards created by the payment schemes, replacing the original card in the digital space. This allows for several network tokens to be created per card, and they function in the same way as the original card when storing and transacting with them. 

However, their digital nature allows them to possess several properties and functions that significantly makes life better and payments more robust for merchants. For instance, network tokens provide a secure and trusted environment for transactions, ensuring data integrity and preventing fraud. In addition, with network tokens, transactions are processed faster and more efficiently, reducing latency and improving user experience.

These qualities solve a major pain point in digital commerce: outdated payment information. With network tokens, businesses can maintain continuity in recurring payments and stored cards, reducing declines due to expired or replaced cards. 

What are the main benefits of using tokens?

Network tokens offer merchants and their customers many benefits. These include, but are not limited to:

•    Improved security: By replacing sensitive information with unique, encrypted tokens significantly reduce the risk of data breaches and fraud. Furthermore, if fraudsters do manage to steal tokenized data, they cannot use the stolen tokens to pay online since they are unable to link the token to payment information stored securely by the payment partner.

•    Increased authorisation rates: According to Visa, merchants using network tokens see an authorisation rate uplift of around 2%. Because they're updated automatically when card details change, payments are less likely to be declined due to expired or replaced cards. This is especially beneficial for recurring payments and subscriptions, ensuring uninterrupted service and revenue streams.

•    Better customer experience: Card information is kept up to date by the cardholder's bank, meaning when a customer come to pay their details are always up to date. The burden of Secure Customer Authentication (SCA) is reduced too, as network tokens reduce the scope of SCA requirements, leading to smoother compliance.

•    Scalability: Designed to support growing businesses, network tokens can scale to accommodate increasing transaction volumes without compromising performance. Similarly, the technology can easily be integrated into existing systems and platforms, ensuring a smooth transition and consistent performance.

•    Reliability: Network tokens ensure consistent and reliable transaction management, minimising downtime and errors.

In summary, network tokens streamline processes, reduce operational costs, and enhance interoperability across various platforms. Network tokens are designed to scale with your business, accommodating growing transaction volumes without compromising performance. This makes them an ideal choice for businesses looking to optimise their digital commerce operations.

Unsure how to approach tokenization? The right partner can help 

Partnering with the right payment acquirer can help your business to offer the most seamless, secure payments experience to customers. Acquirers can facilitate tokenization as part of the credit and debit card acceptance service.

At Cashflows, we maximise payment acceptance with a suite of solutions aimed at improving the customer experience. If you want our help to build a reliable and scalable approach to managing digital payments, contact the Cashflows team today.



 The Cashflows approach
 
As digital transactions continue to evolve, the integration of network tokens has become crucial for enhancing security and streamlining payment processes. Our acquirer services are designed to support network tokens, ensuring seamless and secure transactions for merchants and consumers alike.