Visa: Network Tokenization Shifts eCommerce Away From the Account Number

Physical commerce, via face-to-face, card-present payments, is largely a smooth experience, Swee-May Ngeow, vice president of North America client strategy and solutions at Visa, told PYMNTS in a recent interview.

But digital commerce, she said, marked as it is by transactions initiated remotely, “is all over the place.”

As she noted to PYMNTS, “We all know that today, digital consumers have the highest expectations of everything — they want things seamless, they want personalization, they want optionality — and for things to happen without a second thought, anytime, anyplace.”

The payments industry is hard at work launching new capabilities to match those expectations, she said.

Authorization rates often come at the expense of fraud and risk management. High authorization rates can let riskier transactions through if balanced risk measures aren’t in place. Conversely, said Ngeow, stringent measures taken against fraud — through rules-based systems — wind up blocking some legitimate customers and payments, impacting merchants’ top lines due to a cascade of transaction declines.

The headwinds and frictions, she said, are tied to the fact that “the payments ecosystem has been geared toward using, and wired toward, using the original PAN number.” The primary account numbers tied to credit and debit cards, said Ngeow, have been around for decades. But they’re static identifiers, easily co-opted by fraudsters.

On the merchant/consumer side of the equation, when those cards need to be replaced if lost or stolen, pain points are common, as individuals go seller by seller and platform by platform to replace the PAN numbers.

“But there are solutions out there,” said Ngeow, “that offer something different than using PAN numbers” that she said also “improve the customer experience.”

Key among those solutions, she said, is tokenization, which replaces the customer’s card number with unique identifier called a token. Those tokens are accompanied by dynamic cryptograms securing the credential and enabling the transfer of enhanced data, said Ngeow.

There’s still a bit of education needed to spur a wider embrace of tokenization, she said, as inertia keeps payments system stakeholders from making the shift. But that’s likely to change as some stark improvements in authorization and risk management are illuminated.

Improved Authorization and Fraud Rates

Tokens can improve authorization rates and lower fraud rates, said Ngeow, who added that Visa’s own data shows use of the tokens boost authorization rates by as much as 4% compared to PANs, while fraud rates improve by double-digit percentage points.

Authenticated Tokens

The tokens, she said, are also able to capture additional data on cards and cardholders ahead of time — through what are known as authenticated tokens — offering a level of personalization that cannot be matched with static PANs, as tokens can follow consumers no matter where they are and when they are transacting.

“You’re improving the strength of the credential itself while improving the strength of the ability to know who’s on the ‘other side’ of the credential … and that they are who they say they are,” she said.

Merchants who embrace tokenization, she said, “can abstract away the pain of having to swap out account numbers when there is a lost or stolen card or a new expiration date … there’s no need to have the consumer actually take action to update those details.”

With those improvements in the mix, she said, consumers feel a greater sense of security — and thus, they are likely to recognize and remain loyal to certain merchants and to issuers, too.

The end result of network tokenization, she said, is evident in higher authorization rates, better fraud rates and an improved consumer experience — “and that’s the trifecta” of payments, she said.