Opportunities for online retailers and PSPs

Tokenization is a simple process. The number of a credit card is replaced by another number, a so-called token. A token has a whole range of advantages. It can be equipped with certain properties, such as a limited validity period or usability for a very specific purpose. In addition, it is impossible to draw any conclusions from a token about the original card number. If cyber criminals get hold of a token, they cannot make use of it.

Tokenization is a useful and sensible process for a whole range of different deployment scenarios. There are several ways to organize the required services. Since there are different parties involved, this leads to a high level of complexity in the background.

There is a clear need for action

The European e-commerce landscape shows that 61 percent of all checkout processes are handled with credit cards. 29 percent of these are handled via cards-on-file (card data is permanently stored at the merchant), 19 percent are done via Guest Checkout and 13 percent via Digital Wallets, whose importance will increase significantly in the foreseeable future. There are two challenges to the process. Firstly, many consumers still find credit card checkout too complicated and cumbersome. Secondly, the abuse rates in e-commerce are much higher than at the classic point of sale. Therefore, the need for action is obvious.

The tokenization services of American Express, Mastercard and Visa (Network Tokenization) offer the opportunity to create more user-friendliness while providing greater security. With cards-on-file, the replacement of the original card number (PAN, Primary Account Number) with a token reduces the risk. The card lifecycle information associated with the token can reduce abandoned purchases and further improve usability. The same applies to the Guest Checkout. Here, the new "Secure Remote Commerce" (SRC) standard, which will replace "MasterPass" from Mastercard and "Visa Checkout", will also enable an even smoother checkout process.

The use of tokenization can also benefit merchants. They can avoid time-consuming and regularly recurring PCI certifications.

Network Tokenization and its multiple advantages

Some PSPs offer their own tokenization services to their merchants. However, these can only reduce the risk and prevent the theft of card data. Network tokenization, on the other hand, offers a whole range of additional advantages. An end-to-end connection between card issuer and merchant can be established, that has a positive effect on the acceptance rate, as cards can be automatically renewed upon their expiration. As with Card Present Payments, transactions are tagged with a cryptogram, that significantly improves security and the acceptance rate.

A user will see the improvement too. The picture of a customer’s card can be displayed in the checkout along with the card’s number to increase customer’s confidence.

Network tokenization also provides a basis for further innovations. In addition, PSD2 requirements for strong customer authentication can be met more easily; delegation of authentication to the merchant allows for a legally compliant One-Click Checkout; and in the future, Guest Checkout with Secure Remote Commerce will further promote the use of Network Tokenization. Finally, it is expected that card organizations will soon prescribe network tokenization by mandate.

In order to simplify the process of network tokenization for PSP’s and merchants, Netcetera has developed a ToPay eCom Token Connector. It is a platform that enables PSP’s and merchants to easily connect to the tokenization services of card organizations.

Card organizations all prove that in practice, the use of network tokenization has clearly shown that the rates of approved transactions increase by up to six percent compared to conventional processing. In plain language: merchants can benefit from a higher conversion rate.

Kurt Schmid: "We can only strongly recommend that every online merchant and every PSP take a close look at network tokenization and plan accordingly. The advantages are obvious."

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Network Tokenization for merchants and PSPs: Benefits and Opportunities

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