Convenience and security go hand in hand in today’s technology-driven society; the need for advanced payment technologies has never been greater. Customers and merchants alike demand robust solutions that safeguard sensitive payment information.
Enter network tokenization, a cutting-edge technology that has emerged as a game-changer in the world of secure payments and sheds light on the changes in the way transactions are processed.
Network tokenization is rapidly gaining traction among major card networks, such as Visa, now prioritizing issuing network tokens over personal card numbers (PANs). This integration ensures a wide acceptance network, making it a practical solution for merchants globally for widespread usability and convenience. With over two billion active network tokens issued, Adyen has established itself as a trusted provider of secure payment processing solutions in order to enhance simplicity for consumers.
So what is network tokenization, and how is it changing the future of payments?
What is Network Tokenization?
At its core, network tokenization replaces sensitive payment card information with encrypted tokens. These tokens, used by digital wallets like Apple Pay and Google Pay, provide secure online payment experiences. The tokens act as substitutes for actual card details, reducing the risk of data breaches and eliminating the need to repeatedly enter card information for each transaction. Network tokenization safeguards sensitive information within a locked, secure network, protecting against hackers and fraudulent activities.
Before network tokens came into the picture, businesses would store customers’ payment card numbers on their databases, making them vulnerable to hackers and highly susceptible to fraud. Adyen has embraced network tokenization to offer its customers a secure and efficient payment solution, improving the payment process for merchants. By utilizing network tokens, Adyen ensures better authorization rates, minimizing payment failures and improving the overall customer experience. With a wide coverage of major card networks like Visa, Mastercard, American Express, and more, Adyen’s network tokenization solution offers merchants a robust framework for secure payment processing.
So What are the Benefits of Network Tokens?
- Enhanced Security: By replacing sensitive payment card information with encrypted tokens, Adyen’s network tokenization minimizes the risk of data breaches and fraud, providing businesses with peace of mind.
- Increased Authorization Rates: Network tokenization improves authorization rates by 2.5%, reducing the chances of payment failures and enhancing the overall customer experience.
- Cost Savings: Some schemes, like Visa charge lower fees for processing network tokens than for processing PANs. By adopting network tokenization at scale, businesses save on every transaction.
- Seamless Scalability: Adyen’s network tokenization solution is designed to scale effortlessly by offering businesses to use network tokens with the same integration used for payment processing.
- Ensure PCI Compliance: Businesses that store PANs need to comply with the Payment Card Industry Data Security Standard (PCI DSS). Since network tokenization replaces the sensitive PAN with a non-sensitive token, tokens are removed from the PCI scope. This means that even PCI-compliant businesses can reduce their scope by replacing select PANs with network tokens, enhancing data security while maintaining compliance.
The Importance of Secure Payment Processing
Businesses are accepting payments more and more online, but the reality is that the online ecosystem was not designed to keep traditional payment methods safe. Originally designed as a cash substitute, personal card numbers (PAN) were designed for in-person payments, and now serve as a popular means of online payment. However, they are susceptible to fraudulent activities.
Network tokenization addresses these concerns head-on, providing businesses with a secure and reliable payment solution. Customers, too, are increasingly conscious of their data privacy and expect businesses to take proactive measures to protect their sensitive information. It’s important to recognize and cater to customers at the checkout process and create personal and convenient interactions accordingly. As the digital landscape continues to evolve, and more and more consumers move to digital wallets and online payments, ensuring safe and secure transactions needs to be a top priority.
Global Adoption of Network Tokenization
While network tokenization is gaining momentum globally, it is essential to acknowledge that different regions may have varying levels of sophistication when it comes to this technology. For instance, many issuers in certain parts of the world may not be fully equipped to handle network tokens. However, companies like Adyen have a solution called Network Token Optimization, which dynamically decides whether to use a network token or a PAN depending on the issuer’s authorization preference at that time.
By the end of 2023, the anticipated rate of Adyen Visa token adoption in Canada is projected to reach 40%. This innovative system leverages machine learning and real-time testing by incorporating data from leading e-commerce and online businesses to ensure businesses can provide customers with a seamless payment experience.
Payments technology has evolved beyond its mere transactional function and has become an integral element of the holistic customer experience. Network tokenization is revolutionizing transaction speed and performance, forging the path to a more seamless and personalized future of payments. Subscription-based businesses, such as Netflix, rely heavily on this technology to maintain a seamless customer experience. With network tokens that never expire, transactions have a higher chance of success, reducing the likelihood of failed payments. Not only does this improve customer satisfaction, but it also earns the trust of issuers who recognize the safety and efficiency of network tokenization.
As network tokenization becomes increasingly widespread in the payment industry, it is imperative for businesses to embrace this technology to maintain a competitive edge and unlock new opportunities for growth and success.
Sander Meijers is the Canada Country Manager for Adyen (AMS:ADYEN), the financial technology platform of choice for leading companies. By providing end-to-end payments capabilities, data-driven insights, and financial products in a single global solution, Adyen helps businesses achieve their ambitions faster. With offices around the world, Adyen works with the likes of Meta, Uber, H&M, eBay, and Microsoft.