Network tokenization has become a powerful tool for online merchants and payment service providers as they seek to reduce the chances of card details being misused while at the same time enhancing customers’ e-checkout experiences.
Replacing sensitive data such as card details with a unique digital identifier (token) makes it possible for payment information to be passed between card networks such as Visa or Mastercard, card issuers, and merchants’ payment service providers – all without the card details ever being exposed.
In fact, when a customer asks a merchant to hold their credit or debit card on file (CoF) for the convenience and speed of future transactions, the merchant does not actually log those sensitive details on their internal database. Rather they use tokens during e-checkout that are created and managed by their payment network provider, with the card details and the relationship between the customer’s primary account number (PAN) and tokens held by the provider in a highly secure “token vault.”
Such tokens are unique to each merchant and device. Furthermore, as there is no mathematical relationship between a token and its original number, tokens cannot be reverted to their original form.
The result is highly positive: According to Mastercard, 79% of consumers globally have at least one card on file or are open to having one.1
And transaction data from Visa shows that the use of network tokens can improve payment authorization rates by more than 2% (as greater trust in the process means there are fewer false transaction declines). The research also suggests the use of tokens reduces fraud rates by 26% on average compared with transactions where users’ PANs are sent directly.2