Andre Stoorvogel, Director, Product Marketing, Rambus Payments
We are seeing an unprecedented shift in consumer spending habits. One in five global transactions are now ‘digital’, with online commerce growing at over six times the rate of in-store sales. But this rapid growth is introducing new challenges. Fraud is rising, yet merchants are under pressure to deliver the seamless payment experiences that consumers increasingly demand.
Network tokenization is one of many technologies that online merchants are turning to in a bid to strike the right balance between high security and a frictionless buying experience.
Yet, we should not think of network tokenization as an optional add-on. Rather, it is a foundational technology enabling secure, simple digital commerce.
What is network tokenization?
With network tokenization, the payment networks replace a primary account number (PAN) with a unique EMV®* payment token that is restricted in its usage, for example, to a specific device, merchant, transaction type or channel.
The question is, how is network tokenization different to existing third-party proprietary tokens?
The main (and crucial) difference is that network tokenization ensures that card details are protected throughout the entire transaction lifecycle. Non-network tokens don’t offer this end-to-end security, introducing weaknesses at various points for fraudsters to exploit.
Network tokenization also introduces improved credential lifecycle management to keep card details current, whereas proprietary tokens do not always have issuer permission to access and manage the underlying account data.
Finally, network tokenization opens opportunities for new, enhanced buying experiences across existing and emerging channels.
What are the benefits of network tokenization for online commerce?
To fully appreciate the unique value that network tokens bring to the payments ecosystem, we need to understand how they can address the key pain points for e-commerce merchants.
– Reducing the cost of fraud
We can’t get away from it. Online commerce has a fraud problem.
E-commerce fraud is growing twice as fast as e-commerce sales, with retailers set to lose $130 billion between 2018 and 2023.
We should not be surprised that one in two US merchants see fraud prevention as ‘an increasingly challenging task’. They are already spending $3.48 to combat every dollar of fraud (and this is set to rise with the global cost of fraud prevention increasing by 4% year-on-year).
And yet, the fraud rates keep on climbing. In a hyper-competitive industry where every cent counts, blindly throwing money at a problem is not a sustainable strategy.
The end-to-end security proposition of network tokenization significantly reduces the risk, and mitigates the impact, of malware, phishing attacks and data breaches. Put simply, tokenized card data is useless if stolen and for this reason, network tokenization should be the foundation on which a layered fraud management approach is built.
– Combatting false declines
Given the scale of the fraud challenge, merchants and issuers are understandably adopting a cautious approach.Transaction approval rates for digital transactions stand at around 85%, compared to 97% for in-store transactions.
This leads to a high prevalence of ‘false declines’, where a valid transaction from an authorized cardholder is rejected by the merchant. Often the cause is something simple, such as an outdated billing address, but the results can be incredibly damaging.
Globally, false declines cost merchants $331 billion. 66% of consumers stop shopping with a retailer after a false decline.Unnecessary declines outstrip actual fraud 13 times over. Most tellingly, US e-commerce merchants are losing a total of $8.6 billion to declines, compared to the $6.5 billion of fraud they are actually preventing.
Network tokens can increase approval rates to reduce instances of false declines. This is because card details are automatically updated and refreshed, making it less likely for an erroneous data point to raise a red flag. Also, tokenized transactions are inherently more secure so less likely to be viewed as risky.
– Enhancing the checkout experience
Despite the huge challenges posed by rising fraud, it is telling that 91% of merchants identify ‘minimizing the amount of friction introduced into the user experience’ as the main priority when evaluating their approach to securing payments.
Introducing additional friction into the checkout process, then, is a no-go. But as network tokenization reduces the value of the underlying sensitive data, it adds an invisible layer of security.
We must also remember that merchants want to focus on payment innovation, not fraud prevention. Network tokenization is more than just a security play, and can be used to enhance the buying experience.
For example, it enables consumers to see a fully branded card when checking out, rather than a mish-mash of starred credentials and the final four digits. This boosts recognition, familiarity and engagement.
It also enables payment details to be instantly refreshed when a card is lost, stolen or expires. Better still, it can enable consumers to keep track of where and when their payment credentials are being used. For example, card details could easily be push provisioned to merchant apps.
What is the industry roadmap for network tokenization?
Given the clear benefits, we are already seeing strong momentum for network tokenization for card-on-file transactions. And with EMV® Secure Remote Commerce poised to debut in 2019, we can expect to see network tokenization extend to ‘guest checkout’ experiences.
There are options available for merchants and payment service providers (PSPs) looking to implement network tokenization solutions. For those with significant strategic resource, time and technical capacity, direct integration with the payment systems is an option.
Alternatively, for those looking to move quickly, qualified technology partners offer a fast-track to the immediate benefits of network tokenization (without the potential integration headaches).
FIVE REASONS WHY YOUR BUSINESS’ PROCUREMENT TEAM SHOULD BE USING A CONTRACT MANAGEMENT SYSTEM
By Daniel Ball, business development director at Wax Digital
Even in today’s digital-first environment some businesses are still storing documents, such as contracts, in filing cabinets making it labour intensive to retrieve, manage and even identify important paperwork. In fact, it is calculated that poor contract management practices are costing companies an average of nine percent of their annual revenues.
Moving to a contract management system online can speed up the retrieval process and help decrease the amount of time and resources required to manage contracts. Using a CMS companies can create an online database to centralise information and store documents. Not only does this help ensure contracts are well managed and kept up-to-date, but it can also help businesses save up to 20 percent of overall costs per year.
From legal departments overseeing regulation compliance to finance teams ensuring payment deadlines are met, contract management technology benefits many areas of an organisation. So, how can a good CMS help your procurement team?
How will a good CMS help your procurement team?
The number of suppliers your procurement team must oversee varies depending on the size of your business. It’s not uncommon for large enterprises to be working with thousands of suppliers at one time. A CMS will use automation to record, manage and streamline data, providing procurement teams with important contract details including time and location information, as well as real time alerts such as contract breaches.
Here are five reasons why your business should be using an online contract management platform:
- Increased spend visibility
Using a CMS can give procurement professionals full visibility of suppliers, including the company name and location of where a product is coming from and in what quantity. This transparency will also help contribute to the risk management strategy of your business as it enables you to spot vendors who may be prone to environmental, economic and political uncertainty. In the current environment, for example, suppliers’ may have decreased or ceased production due to COVID-19 or could have been heavily impacted by the negative price of oil, making visibility increasingly important for businesses.
- Eliminates maverick spend
Centralising and streamlining contract documents will ensure that buyers can instantly access up-to-date information to see if a contract already exists. This helps buyers avoid simple and common mistakes that often occur when using manual filing systems, such as onboarding new vendors when existing agreements are in place with another supplier.
- Keeps track of contract renewals
It’s easy to forget about contract renewals or sign up for another term without ending an existing agreement, especially when using a traditional filing system. Businesses using an online CMS can set up renewal alerts in advance, allowing buyers sufficient time to source new vendors or negotiate better prices.
- Improves spend management
A centralised database means that all negotiated prices, contract conditions and other important transactions can be accessed in one place, making it easier to analyse spend. A CMS can help identify discrepancies, find where contract violations have occurred and deal with any associated problems.
- Adhering to regulatory and legislative compliance
It’s important to ensure that all suppliers are meeting the terms of their contracts. A CMS will automatically audit supplier information, meaning that any failures are immediately raised to procurement teams. The platform will also provide notifications if any new data is required or updates need to be made, avoiding potential legal issues.
It’s clear that using an online CMS will benefit your business and procurement teams by increasing spend visibility, enabling access to up to date information, ensuring contracts are closely monitored while contributing to the reduction of unnecessary spend. So, now’s the time to stop relying on those dusty old filing cabinets and start using a CMS.
PROTECTING YOURSELF AGAINST A RECESSION
James Turner, Director at Turner Little
The coronavirus outbreak has spread to businesses, leaving many around the world counting costs. Notoriously, known as the Great Lockdown, it’s been affecting the world economy since early this year. The predicted recession is considered to be the steepest economic downturn since the Great Depression.
So, what does that mean for you? James Turner, Director at company formation specialists, Turner Little, suggests “While there’s no fool proof way to ‘recession-proof’ your finances, establishing a solid base now will put you in a better position to weather the storm.”
“Whilst the future of the global economic landscape is simply too complex to predict, it’s not hard to spot imbalances that have built up, as central banks and governments around the world talk about introducing further fiscal stimulus and monetary expansion, the consequences could be significant,” adds James.
A good wealth management agent will recommend starting by saving a substantial cash emergency fund in a high-yield savings account, understanding your spending habits and where you could cut back if you needed to, and establishing your long-term investing strategy now, so you can stick to it.
If you were to solely invest based on the inevitability of a recession, you are likely to miss returns that are immediately available. If you truly want to recession-proof your assets, the best thing to do is develop a long-term strategy and invest wisely.
Diversification still matters
It’s dangerous to pile all your investments into a single sector, including consumer staples. Diversification is especially important during a recession when particular companies and industries can get hammered. Creating a diversified portfolio of assets blended across asset classes—such as fixed income and commodities, in addition to equities, sectors, geographies and strategies—can also act as a check on portfolio losses.
Build a reserve
To keep your money protected before, during and after a recession, it’s recommended to have an income generation conversation with a financial advisor. This will cover a lot of different topics, but one of the most important is the emergency fund. You’ve likely heard many times that it’s good to have between three and six months’ worth of living expenses set aside in the event of a job loss, health crisis, or other unforeseen circumstance.
Protect your assets
If you’re interested in talking about protecting your assets and your investment portfolio, do get in touch. We specialise in creating bespoke solutions for individuals and businesses of all sizes. The knowledge and expertise of our specialists will be able to assist with any enquires, no matter how complex.
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