As e-commerce continues to grow, the ecosystem faces a multitude of challenges to its successful day-to-day operations. These range from supporting a multitude of new payment methods to navigating through ever more complex fraud, data security, payment processing, and regulatory concerns—as well as taking account of increasing ecological awareness.
What stands out is the exponential rise in online payments which in turn offers exciting opportunities for businesses and consumers. However, this surge brings complexity, more transaction steps, and various payment technologies, leading to increased friction. To address this, enhanced security measures are necessary, but they also pose a higher risk of false rejections.
A recent survey found that 45% of consumers take their business to a competitor after a false rejection without attempting to pay again, and it estimates total losses for retailers at $50.7 billion.
In e-commerce, payment is not only the most vital step for merchants to get right, but also one of the most significant friction points for customers. A frustrating checkout experience leads to abandoned carts and a decline in customer loyalty. Online shoppers expect fast, easy-to-navigate yet secure payment experiences—leaving no room for a poor payment experience. This has an immediate impact on all financial players in the e-commerce market. The only way to success is to improve every aspect of the customer journey.
How Network Tokens Can Help Merchants & Processors
To combat this, network tokens are used to hide the primary account number (PAN) of the cardholder. Providing tokenized value to protect sensitive data such as account numbers and expiration dates at every step of the payment flow helps strike the right balance between security and a seamless customer experience. By improving security and ensuring that card data is always up-to-date, network tokens have the potential to optimize approval rates. Ultimately, this means increased profits and productivity for merchants and successful, secure transactions for processors and banks.
While network tokens aren’t necessarily a new solution for merchants, it’s constantly evolving and important for businesses and payment processors to stay abreast on how this technology has rapidly changed entering 2024.
Processor tokenization is a proprietary service offered by PSPs, acquirers, and processors to minimize a merchant’s PCI scope—the people, processes, and technologies that interact with or impact the security of cardholder data. The general token, which is a replacement for each PAN, is restricted to the merchant and PSP limiting its value in the event of a data breach. Network tokenization goes further by generating tokens in cooperation with the card issuer and card network to offer additional benefits to the merchant and protect the PAN throughout the value chain.
How Does the Transaction Ecosystem Benefit?
The entire payment ecosystem benefits through improved payment authorization rates due to greater trust in the process, along with lower transaction costs realized by merchants and processors benefitting from these authorization technologies. There are also fewer false transaction declines, and reduced overall fraud rates compared to transactions where users’ payment credentials are sent directly. Overall, tokens benefit almost every player in the payment ecosystem.
The technology is especially essential to support the Click to Pay credentials on file that enable today’s consumer experience. For retailers and issuers, the acronym CoF stands for “credentials on file,” but for many consumers, it may as well stand for “concern over fraud.” Approximately 75% of U.S. consumers are concerned about someone stealing their credentials if they store them on file with a retailer, according to Mastercard research. However, that same Mastercard research also shows that 81% of U.S. consumers have saved their credentials on file with merchants they trust and frequent online—because they like the convenience.
But what can we expect entering 2024?
Today, merchants and payment processors are working with solution providers for advanced tokenization technologies. This is because network tokenization remains a largely evolving technology. As such, network tokens are great when they work, but they require a lot of behind-the-scenes heavy lifting with capabilities not offered by the merchants themselves, nor the processors. Each plays a specific role in the e-commerce process, but they do not have the core capabilities to harness the continuing and rapidly evolving changes in the tokenization technology itself. Today’s payment schemes are pushing network tokens aggressively, but they’re still not completely evolved yet for merchants and processors. In fact, the network token architecture currently built today still may not work for all merchants and payment processors alike. Specialized technology partners are equipped to help further ensure the smooth process of network tokenization, keeping everyone’s interests in mind throughout the process.
Today’s New Network-Agnostic Tokenization Solutions
Today’s leading solution providers offer network-agnostic tokenization technologies that sits invisibly behind e-commerce transactions and boosts the e-commerce business for merchants and PSPs by combining the highest levels of security with a seamless customer experience.
In fact, one single harmonized API integration allows merchants and processors to quickly tokenize all the cards in their vault, regardless of network. Technology partners manage the relationships and connections with multiple-schemes on merchants and processors’ behalf, which speeds up time-to-market, and drastically reduces complexity. Furthermore, it opens doors for the latest advancements: by offering value-added services like Click to Pay for guests at checkout.
In the realm of e-commerce, this brings a golden opportunity to maximize online sales. However, as the stakes get higher, so do the challenges. For online merchants, ensuring a smooth payment process isn’t just essential; it’s a decisive part where they compete for customers’ trust. A flawed payment journey can drive customers away, affecting not only e-merchants but also the broader financial ecosystem within the e-commerce landscape. In a world where online fraud has been a concern, it’s essential to prioritize safety without compromising the shopping experience. Enter the dynamic duo reshaping the e-commerce landscape: Click to Pay and network tokenization. Click to Pay simplifies the online shopping experience with a single-click checkout, taking the hassle out of repetitive forms and card details entry.
Together these solutions do more than make shopping easier; they also enhance approval rates and deter fraudulent attacks, ensuring a safer and better experience for your valued customers. But what’s truly remarkable is how these technologies complement each other.
In today’s competitive e-commerce market and challenging economic environment, operational efficiency is essential to capture each possible customer with reliable and secure transactions. And while the payment technologies that support this infrastructure continue to rapidly evolve, the right solution exists from trusted solution provider partners. Fortunately, with the right technology, strategy and partners, merchants and processors can increase their adoption and success rates to make for a great holiday shopping season and an even better 2024.