The Best Way to Use Network Tokens

Quick Hits:

• Network tokens are a security tool offered by card brands, like Visa, to secure online card payments utilizing tokenization.
• Network tokens increase security, which in turn increases authorization rates and lowers security costs.

Identifying fraudulent payments online is a difficult task for merchants and card issuers alike. While the cost of fraud is mounting, false payment declines due to suspected fraud also cost merchants big. False declines cost merchatns an estimated 3% of their revenue every year, according to Vesta. To put that in perspective, if you’re a mid-sized company – earning $50-500 million annually – misidentifying legitimate payments could be costing you anywhere from $1.5-15 million in lost revenue every year.

Thankfully, this loss of revenue is not inevitable. This blog will tell you everything you need to know about network tokens, the key to recoup those lost payments while also reducing fraudulent payments, increasing authorization rates, and automatically updating expired card details.

Network tokens are a security tool offered by card networks that replace primary account numbers (PANs) with tokens issued directly by the card brand. Tokens can be used in place of the actual cardholder data, which is stored in a safe location away from the merchant’s internal systems. These tokens, offered by brands like Visa, Mastercard, Discover, and American Express, decrease risk for merchants who handle raw cardholder data.

Handling cardholder data exposes merchants to high levels of risk, as many cybercriminals will attempt to steal cardholder data. Merchants who use and store customer PANs themselves risk not only losing customer trust, but also paying fines, legal fees, and other costs in the case of a data breach. Since both merchants and the card brands have a vested interest in keeping customer’s payment data safe, card brands created network tokens to better secure cardholder data.

Network tokens keep cardholder data more safe than other security methods, but what does that mean for you and your company? Here are the benefits of network tokens that are incentivizing many merchants to use this tool.

Increased Authorization Rates

False declines are payment declines that are made by the payment issuer because of suspected fraud. The security that network tokens provide validates the legitimacy of network token payments, increasing authorization rates. Network tokens can improve authorization rates by a stunning 2%. That’s 2% more revenue your company can now safely capture, without opening itself up to the dangers of fraud, due to network tokens.

Increased Security

Network tokens reduce occurrences of fraud by nearly 30%. While most security solutions must balance the cost of fraud and the cost of false declines, network tokens reduce both fraud and false declines. Network tokens secure the actual cardholder data outside of a merchant’s internal systems, which means the original data remains safe even in the case of a successful cyberattack. Tokenized card data is useless if stolen and does not carry the same heavy burden of risk. Utilizing network tokens not only keeps your cardholder data more secure, it also takes the weight of securing cardholder data off your shoulders.

Lower Costs

Securing and managing cardholder data without network tokenization can be expensive. Not only does utilizing network tokens mean you’ll lose less money, it also means you’ll spend less time and money securing cardholder data. Because of rigorous PCI DSS standards, storing cardholder data and verifying compliance with all of the rules and requires costly infrastructure and employee time. Freeing yourself from the burden of securing customer PANs means freeing yourself from the costs associated with managing and guarding them as well.

Automatic Card Updates

Network tokens allow the card issuers to manage a card’s entire lifecycle, which means that network tokens can be updated automatically with refreshed cardholder details when a card expires. This is especially helpful for recurring payments, where a customer who gets a new card may forget to update their payment information. Your company won’t get the payment, and the customer won’t be able to pay for the product or service they want. Using network tokens for automatic updates not only increases revenue further, it also increases customer satisfaction.

Network tokens have multiple benefits, as outlined above. Network tokens may not fit every merchants’ payment security strategy. However, there are a few merchant cases where not considering network tokens could lead to huge losses.

If you are a merchant that struggles with authorization rates and false declines, network tokens would decrease the amount of revenue being lost due to suspected fraud.

If you are a merchant concerned about actual fraud and the safety of your customer’s data, network tokens could save your company from losing customer trust and paying the steep price of fraud.

If you are a merchant that generates a significant amount of revenue from recurring payments, network tokens can ensure your recurring payments run smoothly without causing headaches for you or your customer.

If you’re interested in network tokens, we’d love to help you implement this security tool, reclaim lost revenue and secure your customer’s data.