E-commerce customers in the digital age are well aware of the risks of online purchases but also have high expectations for customer-oriented shopping experiences. No wonder one-click checkout and recurring payments are no longer additional payment features but an industry standard for all markets alike.

These features’ sleek payment process wouldn’t be possible without tokenization, the technology which allows customers to securely save their card and complete online purchases in a few clicks. As it satisfies customers’ demand for seamlessness and safety, this function draws a line on which brand customers will end up purchasing from as the e-commerce competition is becoming increasingly cut-throat.

However, network tokenization, a new upgrade from the card networks, is soon to come to improve and set the new standards for the payments ecosystem.

Seamless payment meets fraud aversion

So, what is network tokenization and why is it a pivotal change for all players in the e-commerce ecosystem?

First, we must understand the mechanic behind tokenization. Tokenization is a security protocol practiced by payment processors to camouflage card details with unique tokens, which are used for payment authorizations throughout the payment flow.

These tokens allow customers to securely save their cards in the system, which in turn also enables seamless recurring payments. With this technology, merchants can also prevent hackers from accessing the sensitive data without the liability of handling it.

Network Tokenization: the future of seamless payments

Card networks have come together and curated a solution which could help amplify the benefits of tokenization, which is network tokenization.

This new solution does not largely change the payment process. Tokens are issued for a card and are used throughout the authorization flow. What will change is where the tokens are created.

With network tokenization, the card networks are the one generating the tokens, which means one card is given one token to be used across platforms. The result is a streamlined payment authorization which is not only faster but more secure.

What’s in it for your business?

The impact of this change in the token issuer is greater than you may expect, especially in enhancing card data security and the payment experience.

1. Reduced customer friction

As the card networks become the sole token creators, they have a full record of generated tokens and their linked cards. Therefore, when a lost or expired card is replaced or renewed, the networks automatically detect and update the token with the new card.

Respectively, buyers no longer need to manually delete the old card and input the new one on every single application. Therefore, the chance of payment disruptions is minimized and the payment experience optimized.

2. Improved authorization rates and sales conversion

Unlike third-party payment processors, card networks are already well-trusted by local and foreign banks. Thus, network-generated tokens do not require as much speculation for fraud.

Transactions can be approved much faster especially for cross-border transactions where banks from different countries may fail to recognize each other. This results in maximized and improved authorization speed for domestic transactions and reduced decline rates for international payments.

Ultimately, the shortened checkout process can increase conversion rates significantly.

3. Enhanced security

As the card and token database is consolidated in one place, the risk of unauthorized access to card information is significantly decreased. Card networks will also have a full visibility of card usage on all platforms, meaning they can now keep track of where a card is saved and used.

With this new ability, we can expect emerging services from card issuers in the near future. A forthcoming technology is comprehensive card management portals through which card holders will be able to directly subscribe and unsubscribe to services as well as detect suspicious activities at an early stage.

Be aware and prepared

It might come as a good news to you that this shift is sizable and will take quite some time to complete. We, however, suggest that you stay afoot as it will eventually be rolled out on a global scale and become a mandatory practice for all online businesses.

Mainly, there are two actions businesses should take to promptly adjust to this change:

1. Migrate your card data to a PCI environment (for non-PCI merchants)

Storing card data offline could make your business an easy target for hackers. If your platform is still non-PCI compliant, we suggest that you migrate your offline customer database to a PCI environment and convert it into network tokens. It will also be an excellent boost to quicken your authorization process.

However, transmitting the data in bulk can be a laborious task which could exhaust your resources. Opn offers card migration services. Talk to Opn payment experts to find the ideal solution for your business needs.

2. Convert your system tokens into network tokens (for banks and payment processors)

Once network tokenization becomes the new norm, card networks will enforce penalties on non-network tokens, which could hinder and add more costs to your operations.

After converting your payment gateway tokens into network tokens, your firm’s PCI compliance will be on par with the card scheme standards. Your platform will also automatically embody the unique features of network tokens as mentioned above, uplifting the user experience for your clients.

However, you would need to build a compatible solution, approved by card networks, to finish this integration. This procedure is time-consuming and could cause a disruption for your clients’ operation. We suggest that you utilize a token processing service to minimize costs and effort.

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As mentioned, this transformation will not only affect e-commerce merchants but all players in the digital payment ecosystem. Thus, brands should start looking for a suitable solution.

Stay tuned for more information on network tokenization or contact us for inquiries.