By Jacob Spencer, Chief Revenue Officer at BR-DGE, the breakthrough payment orchestration provider
The need to repeatedly enter and remember payment details across different sites when shopping online is a huge headache for both customers and merchants. As well as causing frustration for customers who want to avoid fiddly, time-consuming shopping experiences, it is prone to human errors that can cause transactions to fail to complete.
It’s no surprise, then, that one-click payments are experiencing an e-commerce explosion. In fact, the global number of tokenised payment transactions is set to pass the 1 trillion milestone by 2026, and there are a number of unexplored possibilities for the technology that is making it all possible: tokenisation.
How tokenisation is facilitating one-click payments
For merchants, the frictions caused by untokenised stored payment details, including PCI DSS compliance and the need to manually update card details, make all the difference between a successful payment and a failed one – and that’s where tokenisation is transforming a traditional pain point into a transformative revenue opportunity.
Tokenisation allows merchants to store the tokens instead of the customers’ readable payment data, or better still, store the tokens in a partner’s secure vault. By taking this approach, they reduce their PCI DSS compliance burden, and their customers’ card details won’t be compromised in the events of a data breach. That’s because tokenisation encrypts the card data where the merchant has it stored – whether that’s in their own vault or in a third-party vault. Payment tokens can be stored on a device in the same way as a website cookie, creating a digital fingerprint on the device that can utilise that token.
But there’s more than one type of token, and each has its own limitations. Payment or gateway tokens, for instance, are typically proprietary and siloed within different platforms. This means they’re not interoperable outside of their own ‘walled garden’ which restricts their use and leaves merchants tied-in to certain processing partners and transaction flows.
The data from payment and gateway tokens gives merchants limited visibility over who their customers are, how they like to pay, and what they like to buy. They can also limit a merchant’s ability and agility to adapt their paytech stack. Just as the payment industry has made great strides in removing frictions from payment processes, we need to ensure that tokenisation is made as simple and as interoperable as possible.
Creating effortless commerce with network tokens and a hybrid approach
In contrast, network tokenisation replaces the customer’s primary account number with a unique EMV token, issued by the card scheme. This means it can be used across channels, gateways and even different merchants.
By using network tokens instead of proprietary merchant or gateway tokens, card details are protected throughout the payment chain, whilst also offering advantages such as lower processing fees and auto-updater capability, to ensure the card details on file are the most up to date. To give them a crude analogy: network tokens are like Robert Patrick’s Terminator T-1000 liquid metal model: fluid, flexible, adaptable to changing demands, and able to follow the transaction through different stages of its journey.
For merchants and their payment providers, the benefits of network tokenisation are obvious. Most significantly, it reduces fraud risk in payment workflows and aids compliance with PCI standards. Across the payments industry, network tokenisation has been shown to reduce the average fraud rates by an astonishing 26% (according to data from Visa), without creating any additional friction for consumers. That’s a win-win right there.
But there’s more. Network tokens can also protect consumers from expired PANs, meaning that if the customer’s original card expires, the token will carry on uninterrupted, because the underlying token gets automatically updated via the card issuer. This removes the headache for customers having to re-enter their new card details once their card expires and supports elevated pass rates. There are also preferential transaction fees associated with transactions that use network tokenisation, making them more attractive from both a cost and authorisation point of view.
The role of payment providers in supporting merchants
What we know for sure is that payment flows will get more complex, fraud will shapeshift and mutate, and customers will quickly take their money elsewhere if their payment experiences are too slow and gnarly to complete. That’s why more merchants and payment providers are adopting tokenisation to slash fraud and false declines, curate a great customer experience, and accelerate their own business growth.
But even as tokenisation itself broadens into new types of tokens, merchants will need more guidance and support to understand, adopt, and implement it for maximum effect. At BR-DGE, we’re all about making complex payments as simple as possible, and the fewer clicks to complete a payment, the better.
In the future, I’m confident that we’ll see digital wallets combining with tokenisation and biometric ID to enable everyone to prove who they are, no matter what service they’re interacting with. For now, we’re proud to be a part of a wave of payment technology that’s meeting consumer demand for frictionless payment experiences.
