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Christmas e-commerce retailers will reap the benefits of tokenization

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Year upon year, online shopping continues to grow, and much of this is concentrated on the festive season. While the need for payment security is often seen as being in tension with a good customer experience, that doesn’t have to be the case

With e-commerce sales forecast to reach $4.2 trillion in 2021 and over 2.14 billion unique shoppers worldwide, getting the online shopping experience right for customers potentially has huge upsides. For a lot of businesses, the big focus is the November and December holiday season, when over 40% of sales take place.

However, holiday shopping represents an opportunity for cybercriminals too, and online fraud is on the rise. In the UK, for example, e-commerce fraud now accounts for half of all detected credit card fraud. This can have big financial and reputational implications for retailers whose payment systems are not sufficiently secure.

Customer-friendly solutions

Having an effective and easy-to-use e-commerce platform is one important way for retailers to distinguish themselves from the competition. As part of this, an online checkout experience that is both smooth and secure is increasingly what customers expect. If their experience is not simple to navigate, it has a direct impact on business: 18% of online shopping carts are abandoned because of complex payment processes.1 This rate of order-fulfillment failure is significant for any business and can ruin holiday season sales.

However, just making payments simpler without taking security measures to protect credit card data exposes businesses to other risks. A further 17% of consumers abandon an online purchase because they do not trust the website with their credit card details. Retailers’ e-commerce platforms must have end-to-end solutions that make online shopping a safe, trustworthy experience. Yet there are now so many different payment options and authentication systems available, it can be hard for customers to know which ones are legitimate and secure. This is why having credible security measures in place, measures that also provide a great customer experience, is such a powerful differentiator.

Using token-based payments technology can help optimize the online consumer experience. Because card information is stored on a secure token, the retailer is simply passing that token to the payment provider. The provider decrypts it and uses the card data to create the transaction, mapping the information against card-on-file (CoF) data for authentication. It is superior to encryption technologies because it enables higher authorization rates without compromising on security measures. This solution provides a win for both the consumer and for the retailer.

The keys to e-commerce security

Network tokenization has a very wide variety of use cases, including in-car, in-app, and mobile e-commerce payments.  Examples of benefits include the automatic update of card details for subscription services when an existing card expires, which reduces lost business, and ordering food for pick-up while driving. Sales made on mobile devices are also growing in importance. In the UK, half of all online sales are now made on a smartphone.2

In fact, the increase in tokenization is so widespread that by 2022, CoF tokenization will become the dominant payment method, with 95% of e-commerce payments predicted to be tokenized.  The rapid adoption of the technology is being driven by the benefits it brings to financial institutions, retailers, and customers – and is now unstoppable. Kurt Schmid, Innovation and Marketing Director at Netcetera, notes that it makes life easier for all parties: “Tokenization solves the problem of outdated payment credentials. We have seen around 6% of all e-commerce transactions failing because of not enrolled or outdated payment card credentials.”

“Network tokenization in e-commerce benefits the user experience, the conversion rate, and the security, so it is an all-round win for the consumer, the merchant/PSP, and the card issuer“
Kurt Schmid
Innovation and Marketing Director Secure Digital Payments at Netcetera

Making sure criminals don’t ruin your customers’ Christmas means making sure that every step of the payment life cycle is protected, and at the same time making sure that nothing gets in the way of online holiday shopping. For example, combining network tokenization with a robust customer authentication process at login creates a platform for an easy checkout and higher sales, by reducing the need to provide personal information at the point of sale. 

Putting the cart first

The festive and Christmas seasons represent great opportunities – for both retailers and criminals. But businesses need not be making Christmas gifts to criminals out of their customers’ credit card information. It is possible to protect customer data and create a good customer experience. It does not have to be an “either/or” choice. Tokenization technologies and customer authentication systems provide solutions to the knotty problem of securing online shopping without getting in the way of the checkout cart.

  1. Baymard Institute, “46 Cart Abandonment Rate Statistics,” December 2020

  2. Adobe Analytics, Adobe Digital Economy Index, Q1 2021

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