The digitization of the payment landscape brings with it both opportunity and challenges.
As digital wallets, contactless payments, and eCommerce technologies continue to transform the way money moves, sensitive account information often moves alongside each transaction. This leaves personal data like addresses, purchasing history and other critical elements of a consumer’s digital identity exposed to bad actors in hot pursuit of their next target.
On the other hand, merchants also frequently suffer breakage when a customer moves, changes payment methods, or otherwise updates their payment information.
That’s why many firms and platforms are turning to tokenization, a process replacing personal user data with a unique identifier called a token, which is then used when making a virtual payment in order to protect and secure sensitive information.
“We’ve seen payments evolve, and they will continue to evolve, but network tokenization improves the digital commerce experience by providing a more secure transaction, as well as helping merchants reduce payment breakage,” Valeri Vanourek, VP, digital products at Discover Global Network, tells PYMNTS.
“The card member is able to transact more securely because [tokenization] isn’t exposing the 16-digit primary account number [PAN] on the front or back of a card in the payment rails and throughout the transaction process,” she adds.
After all, sensitive data can’t be compromised if it’s not available in the first place.
Tokenization follows the payment transaction flow but remains invisible to the consumer, who is able to continue using their preferred payment method for the occasion, Vanourek explains.
She adds that tokenization is also “designed for meeting future payment methods” and transaction occasions.
PYMNTS’ latest study of 2,584 U.S. consumers, “Retail Banking Security: Consumer Behavior in Focus,” finds that nearly 2 in every 3 retail banking consumers (62%) are willing to forego convenience for enhanced security for their sensitive information.
Fortunately, with tokenization, they can have both security and convenience.
And while there are “certainly some players in the ecosystem that are hesitant,” Vanourek emphasizes that, “we are still seeing more urgency to adopt tokenization.”
She explains that merchants and their payment facilitators are not blind to the benefits of tokenization — namely increased authorization rates and reduced fraud rates, two key elements that are of “paramount importance” to many players in the payments ecosystem.
“The industry is about halfway there, and demand continues to grow” she notes.
“We know that improving the customer experience and reducing friction helps everybody, and the way we’re able to do that is with tokens,” Vanourek says. “Everyone has felt the pain in the past of getting a new card and having to go to the gazillion websites that card is saved on and update your information — but with tokenization, card members don’t have to do that anymore.
“It really doesn’t get much easier than that.”
In a world where online transactions and payment vehicles continue to command a bigger slice of commerce, authentication and transaction processes have become more critical than ever.
“Online shopping isn’t going away, and in fact it’s only likely to increase,” Vanourek says. “Merchants and acquirers, they see the value in network tokenization, and they want it — if we allow token aggregators to be boarded and proliferate, it really lessens the overhead and drives scale, allowing acquirers to tokenize all the merchants they support.”
While many innovations see their initial advance slowed down by the behavioral hesitations of end users, that doesn’t appear to be the case with tokenization.
Vanourek says she is dead set on having “the most reliable and scalable resilient system and platform in place that can meet future needs.”
She envisions those next generation needs as running the gamut from Internet of Things to headlines commerce and connected payments through drive-thrus and car dashboards.
“We want to be able to meet those use cases securely and protect those transactions,” Vanourek says.
Essentially, she adds, wherever customers want to pay — and how they want to pay — she wants to be there to support that.
After all, tokenization “follows the payment transaction flow,” and that includes wherever it is that transactions might end up flowing in the future.
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