Tips for transaction lifecycle management and tokenization

When we consider transaction lifecycle management, we’re thinking of ways to ensure a card payment will pass each of the “checks” needed to achieve authorization. A common stumbling block for card payment success is that the customer’s card is out of service: it’s lost, stolen or simply expired. You may choose to store and update customer payment credentials – yet this must be compliant, secure, and efficient.

To tackle these challenges, this article will consider the ways you can increase revenue capture through smarter management of the stages of a payment. In particular, I’ll focus on using network tokens to maintain a healthy transaction lifecycle. We also have a dedicated blog covering all other payment tokenization options if you’d like to refresh on the different types.  

The possibilities of network tokens to bring about improved margins are exciting. Using them strategically within payment retries is also an opportunity to increase revenue. For example, Papa Johns UK gained +6% on card payment acceptance rate when using network tokens. 

Tokens not only help to keep card-on-file credentials up-to-date, but help to reduce payment declines. Our data finds that we see a consistently higher acceptance rate on payments with network tokens compared with cards – around 10% uplift for both Visa and Mastercard payments. 

Tokenization therefore helps to enhance customer “stickiness” because payments are less likely to fail for technical reasons. It’s also a good way to link customers up to a one-click checkout experience. All of that means you’re less likely to lose out on a payment because of reasons such as the customer entering the wrong details or the checkout process simply taking too long.

Network tokens for card-on-file management

Issued by the card brands, network tokens are increasingly becoming the keystone of efficient payment credential management practices. A recent Mastercard report found that 55% of merchants that enable network tokens do so because it provides greater ability to store and update payments. This was the most important motivation for using network tokens for 13% of merchants, according to the report.

Depending on your level of compliance and your plans for token use, you’ll need to look into options for token storage. At Checkout.com, you can store several types of data in the Vault:

• Customer data (email address, phone number, full name)
• Payment instruments (to request payments from the customer’s payment card or bank account)
• Network tokens

Note: If you use a third-party payment vault then you don’t need to handle raw payment data, and you only need to meet PCI SAQ-A status. If you seek to store or process your customers’ payment details (i.e. the PAN), you’ll need to meet a higher PCI status (such as PCI SAQ-D or SAQ A-EP).

You can also forward these credentials on to a third-party service. This can help you to manage your transaction lifecycles with more control, as you can connect your tokens with multiple payment processors, external fraud engines, and other services. Rather than keep your payment flows within one provider’s closed loop, you gain the flexibility to design a more customized approach. For instance, you can more easily test and compare the performance of PSPs, thanks to the ability to retry traffic through a different provider if one should fail.

Here are some further core strategic uses of tokens for stored payment management:

Reduce payment failure due to an expired payment card

An important way of managing the transaction lifecycle is to ensure payment credentials are updated at the right time. This can bring down the rate of payments which fail due to a card-on-file which is no longer in active use. There are several approaches to this.  

‍Tokenization

‍One of the core advantages of using a payment vault is the ability to store customer payment details in the form of a token. This can strengthen “customer stickiness” in the form of repeat purchasing owing to secure storage of customer payment details in token form.Working with Checkout.com, the Financial Times was able to keep customer payment details up to date thanks to network tokens. This was particularly crucial for the news publisher, as payment failures can account for up to 40% of involuntary churn in such subscription-based businesses.

‍Real-Time Account Updater

‍We saw up to 3.3% acceptance rate uplift in 2024 thanks to the Real-Time Account Updater. Let’s look into the specifics of how it works.When you update stored credentials with Checkout.com you can ensure customers’ card numbers for Amex, Mastercard, and Visa have the correct card number and expiry date. The Real-Time Account Updater (RTAU) also checks if the card is still valid, and the account has not been closed, and the card has not been reported lost or stolen. The precise point at which the update takes place depends on the card brand; Mastercard and Amex payment details can be updated regardless of whether or not a payment is triggered. For Visa, on the other hand, card updates are applied within the payment authorization process. We also have the ability to trigger  RTAU on declines in certain situations. Please see stored credential documentation for full details. Note that these credential updates are for payment instruments and full card details, not for use with network tokens. 

Customer loyalty initiatives

Tokenization also provides the opportunity to connect customer payments with promotions, rewards, customer programs, and loyalty points. Using network tokens to connect your customers’ payments to network offers is a particularly neat way to encourage conversion at checkout. If customers know they can take advantage of a cashback promotion or achieve another kind of benefit from using a particular payment method with your business, it can encourage them to buy from you. You can use vaulted data to associate a unique customer with various payment methods. For instance, you can enrich customer data in the Vault to create and connect multiple payment instruments for a single customer. This is all PCI compliant and secure through Checkout.com. That means you are within the required bounds of responsibly managing customers’ sensitive data.

Credential lifecycle management via digital wallets

Although card-on-file payments are a popular reason to enable network tokens, it’s only the second greatest motivation; the top use case is for allowing customers to pay by digital wallet. Of the merchants who use network tokens, 87% do so to enable card payments via digital wallets. At Checkout.com, we’ll decrypt Apple Pay and Google Pay tokens on your behalf to allow your customers to make payments easily through these familiar methods. Taking payments by digital wallet has several benefits, namely:

• Customers can load several payment methods into their wallet to use as funding sources. This can provide alternative means of payment if one method is declined for any reason.
• Digital wallet payments are considered authenticated because they are accessed through a secure biometric such as fingerprint scan or phone passcode
• A customer could easily top up available funds on their digital wallet funding sources by switching between apps on the same device.

Customers are increasingly looking for payouts into non-traditional funding sources. That means you need to move with the times, and offer the right payout method mix for your customer base. When it comes to payouts via digital wallets, for instance, you can use stored payment instruments or your own decrypted Apple Pay token for Apple Pay card payouts. You can do so through the Checkout.com payment API across all regions supported for card payouts. This is particularly relevant for lines of business that reach customers through mobile, such as gaming, entertainment, streaming, retail, rewards, and others. Enabling Apple payouts shows your customers you’re equipped with the latest secure technology for transaction processing. It can further increase customer loyalty if payouts all take place on a technology platform your customer is already using, consistently trusts, and can access easily.

Managing payment lifecycles through Checkout.com

There is a lot to be gained from clever credential management in terms of customer loyalty and satisfaction, smoother payment experiences, and reduced involuntary churn. Remember, transaction lifecycle management is important to view from multiple perspectives and payment types, including one-time customer-initiated payments, as well as recurring payments, and payouts.There’s a fair amount of customization and control you can achieve through various product mix options with Checkout.com. On the one hand, you can combine Intelligent Acceptance with network tokens and Real-Time Account Updater for improved acceptance rates. On the other hand, you can also use the Vault in a standalone capacity. This is helpful if you’re looking for secure customer credential storage plus portability.You can even control the processing of network tokens in the API request to run your own experiments and optimize acceptance rates according to your own strategy. Why not contact a Checkout.com team member to find out how you can improve your transaction lifecycle management?