Network tokenization guide

Product
6 min read
In this article

Learn how network tokenization can help increase your authorisation and success rates by eliminating card on file expiry, increasing payment security, and removing gateway lock-in. 

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What is network tokenization? 

Tokens are a proxy for the 16-digit number found on every debit or credit card. Unlike gateway tokens, network tokens are generated by the card schemes (such as Visa and Mastercard) when an individual uses their card. The card schemes are responsible for maintaining the tokens so that they remain valid, even if the underlying card data changes or expires. 

This new industry standard replaces sensitive card details and can help businesses achieve higher success rates, reduced fraud, and enhanced security. Unlike gateway tokens generated by payment processors, network tokens are globally interoperable and can be used across gateways and acquirers. 

Why use network tokens with Precium? 

Increase success rates 

Transactions processed using network tokenization have higher success rates due to increased security standards and the involvement of the card network and issuers in the tokenization process. In particular, merchants can expect lower rates of false declines and, through an orchestrator like Precium, can set up routing rules to cascade failed transactions to another payments processor in real-time. 

Eliminate expired card failures 

A network token is automatically updated with a cardholder’s new details by the card scheme. For example, if a customer’s card expires or is stolen, their network token will be automatically updated with their new card details. This removes the need for customers to manually update their card details, removing friction in checkout and eliminating card expiry failures for subscription businesses. 

Remove gateway lock-in

We have built direct integrations with the major card schemes to support network tokenization. Combined with our PCI-compliant token vault, we can securely generate and store network tokens, saving you months of development and compliance effort. 

In addition, we will create a unique Merchant Requestor ID for you, which means that you will own your customer tokens and will be able to use these tokens on multiple card gateways and acquirers without customers needing to re-enter their card details. 

Reduce fraud and chargebacks 

Network tokenization significantly reduces the risk of cybercrime, data breaches, and fraud. By securely replacing sensitive card information with encrypted tokens and transaction-specific cryptograms, businesses can safeguard customer data and reduce operational risk. 

How do network tokens work? 

Tokenization is the encryption process by which sensitive card data, such as the card PAN and expiry date, are replaced with a unique string that acts as a reference to the underlying data. This reference is called a token. Tokenization allows a payment processor to enhance payment security, as sensitive data is no longer passed between the payment system. It also allows merchants to collect recurring payments, recognise repeat customers, and save customers from having to re-enter their payment details for future purposes.

Tokenization has become the mainstream standard for secure online payment processing, however most tokens today are gateway tokens, which are issued by a single processor and are only valid for that processor. This means the tokens cannot be used to charge on an alternative payment gateway (for example, during downtime) and are not easily transferable if a merchant wants to switch its primary processor. 

Network tokens are issued directly by the card schemes, such as Visa and Mastercard, and are generated when a customer uses their card for an online purchase. The customer enters their card information at checkout, and Precium securely passes this information to the card networks. The card network creates the network token and sends it back to Precium as well as the issuer (the customer’s bank). 

For future transactions, the network token can be used with any network-token enabled payments processor and acquirer.

Take note: Network tokens can be provisioned either under the payment processor’s name or the merchant’s name. The token owner is based on the Token Requestor ID used to provision the tokens. As a merchant, it is in your best interests to have your own Token Requestor ID so that you retain ownership of your tokens, even if you choose to change payment processor. 

Who benefits from network tokenization? 

Any business processing online transactions can benefit from network tokens, through increased authorisation and success rates, reduced fraud risk, and enhanced customer experience. Businesses that process recurring payments are particularly poised to benefit, as expired or lost card details typically contribute up to 50% of payment failure and associated involuntary churn. 

Precium’s network tokenization solution is processor-agnostic and available for merchants in South Africa. This approach means that as a merchant, you own your tokens and can migrate seamlessly between payment processors. We will continue to expand our capability as more issuing banks in Africa begin to adopt network tokens.

Ready to get started? Book a sales consultation to learn how network tokenization can supercharge your card payment success.

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