Network Tokens: Why your 2024 payment strategy needs them

The growth and variety of online payments are good for business and consumer choice. However, the number of steps and payment players in every transaction that grows in parallel means more complexity. And with complexity comes friction and the need for tighter security, which means a greater chance of false declines.   

A recent survey from Checkout.com and Oxford Economics reveals that 45% of consumers won’t retry a payment after a false decline and are likely to take their business to a competitor. The same study found 42% of respondents say they are reluctant to return to a website after a false decline. The overall loss to merchants in this study was calculated to be as much as $50.7 billion.  

Better acceptance rates with Network Tokens

Network Tokens are used to conceal the Primary Account Number (PAN) of a cardholder. By providing a tokenized value to protect sensitive data – such as account numbers and expiry dates – during all stages of the payment flow, they help to provide the right balance between security and seamless customer experience. 

By increasing security and ensuring that card details are always up to date, Network Tokens have the power to optimize your authorization rates. Ultimately, this means increased revenue and performance for your business. 

Let's look at some of the reasons to use Network Tokens: 
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• Increase revenue with a seamless payments flow

Card payments can sometimes involve security steps, such as Strong Customer Authentication (SCA), which can damage sales through false declines if SCA is not adhered to and cart abandonment as consumers become frustrated with friction at checkout. Tokenization can streamline payments and reduce security challenges, but without compromising security. According to Visa, merchants using network tokens see an authorization rate uplift of around 2%, while Checkout.com has recorded an uplift of 2-3% for most merchants – with subscription-based merchants benefiting most. 

• Improve acceptance rates with card issuer visibility

Card issuers have more confidence in authorizing tokenized payments because the network token is unique to the merchant and the customer and they have more visibility. The increased visibility and control that network tokens give issuers result in more confidence when approving transactions. This means better approval rates. 

• Lower interchange fees

Since April 2022, merchants using network tokens have been charged lower interchange fees. Visa charges non-network token transactions at a higher rate, so merchants adopting network tokenization can reduce costs. From October 1, 2023, Visa will introduce a Secure Credential Framework Integrity Fee. This 0.025% fee will apply to domestic and intra-regional ecommerce transactions in Europe. Merchants can adopt Network Tokens to avoid this fee, as card-not-present PAN authorization approvals must be processed using Visa Network Token (EMV Payment Token), 3DS authentication, Apple Pay, or Google Pay. 

How Checkout.com uses network tokens 

Checkout.com can request network tokens on behalf of merchants. The relevant card scheme (Visa or Mastercard) will supply Checkout.com with the token, which is then used instead of the card details and provides the security and performance benefits outlined above. 

Merchants who have invested in our performance product, Intelligent Acceptance can also benefit from Network Tokens without requiring any integration. Intelligent Acceptance uses network tokens only if the issuer supports them and the predicted cost is lower, or the chance of success is higher, than using PAN credentials. Because Intelligent Acceptance has built-in optimization features, our engine can learn from past transactions and improve performance. AI and Machine Learning judges when to use network tokens and when to use a PAN for optimum performance and cost benefits. 

As a Network Token Service Provider, Checkout offers two types of service:

• Checkout.com-managed service

Checkout.com will manage all aspects of the Network Token solution, including data updates, storage, and performance optimizations. Allowing merchants to focus on other core business activities. With a Checkout.com  managed solution, your token vaulting and updates will be provisioned and managed for you and continually optimized. All sensitive data can be removed from your business environment and stored securely, boosting operational efficiency and making it easier to comply with PCI requirements because merchants can process transactions without exposing customer data.  

Additionally, thanks to a seamless checkout experience, merchants can convert more sales. Customers won’t need to re-enter their card details, including when changing an order, making transactions faster and more convenient with one-click payments as the Network Tokens are stored in Checkout.com’s vault. Tokens are updated frequently, reducing the risk of involuntary churn – a powerful asset for merchants who wish to generate revenue through repeat business from card-on-file or subscription models.

• Merchant-managed service

With Checkout.com as your Token Service Provider, you will soon be able to request network tokens and cryptograms suitable for a multi-PSP environment. Checkout.com understands the need for flexibility and choice, allowing customers to choose the type of service that is right for their business. Managing your own solution will give you full token ownership and management of network tokens.

Payment partnership and leadership

Checkout.com consistently monitors and tests transactions to provide the highest acceptance rate on behalf of its customers. We work closely with leading industry bodies, such as MRC and EMVco, to advance industry practice and improve payment processing for merchants. 

In today’s competitive online marketplace and challenging economic climate, operational efficiency is vital. The good news is that acceptance rates can be improved with the right technology, strategy, and partners. This is where Intelligent Acceptance  is solving the performance problem in tandem with our Network Tokens solution. 

Individually, both can make a significant difference to the bottom line, minimize fraud, and improve customer experience. But the true value lies in combining Network Tokens with IA as part of a concerted revenue-optimization strategy.

Whether adopting Network Tokens as a standalone solution or as part of Intelligent Acceptance, merchants receive the highest level of support and guidance. And with Checkout.com as your technology partner, you can optimize payments end to end. You achieve faster payments, less downtime, higher acceptance rates, and lower costs – all thanks to uninterrupted and secure payment flows.