Maintaining customer loyalty ranks among the top priorities for businesses, yet earning a customer's trust remains a formidable challenge. Safeguarding payments and protecting customers' data not only boosts trust but can also enhance a business' conversion rates. Consequently, scheme tokenisation, also referred to as network tokenisation, emerges as a viable solution in achieving these goals.
In this article, we’re going to explore the concept of network tokenisation, explain its functionality while ensuring heightened security for customers. Let's delve into the specifics of this solution. Watch our video to learn more about scheme tokenisation below.
What is scheme (network) tokenisation?
Scheme tokenisation is a type of tokenisation provided by card schemes (e.g. Visa, Mastercard, Discover, AMEX, etc.) that replaces sensitive card numbers for unique tokens during online purchases. This is most commonly used for PANs. These so-called network tokens, also known as scheme tokens or vault tokens, are digital identifiers used in place of the PAN and are issued by the cardholder’s card scheme (more to come on this process).
These tokens are updated automatically by the card schemes with any changes to card numbers, streamlining the payment process for merchants. For example, if a card is reported as lost or stolen, the associated network token will seamlessly replace the existing card details with the updated ones, eliminating the need for a new token to be generated for the customer’s reissued card. This not only simplifies payment processing for merchants but also ensures a seamless payment experience for customers, as they can continue to use their tokenised card without interruption.
How does scheme tokenisation work?
Network tokens work by replacing the cardholder's credit or debit card data with a token that is unique to the customer and merchant. Here's how it works:
- Upon visiting a merchant's website for the first time, the customer opts to save their card details.
- Subsequently, the payment gateway requests a network token from the cardholder’s respective card scheme (e.g. Visa or Mastercard).
- The card scheme then automatically generates a unique token for the customer's card details. This token is shared securely with the merchant's payment service provider.
- The payment service provider then forwards it to the merchant, who stores it for future transactions made by the customer.
This streamlined process eliminates the need for customers to re-enter their full card details for subsequent purchases, reducing friction and elevating the payment experience for customers.
Gateway tokenisation vs network tokenisation
The distinction between network tokenisation and gateway tokenisation hinges on which entity converts the card number into a token: the card scheme or the payment service provider (PSP). Scheme tokenisation involves the card scheme converting the customer’s PAN into a token, which is automatically updated when a card is reissued.
In contrast, gateway tokenisation is overseen and stored by the PSP, which generates tokens within its system. Both methods employ unique processes for token generation and can be utilised across various payment ecosystems, ensuring a streamlined and secure payment process.
What are the benefits of scheme tokenisation?
Scheme tokenisation presents numerous advantages for merchants, ranging from enhanced security for customers to increased acceptance rates. Here's a breakdown of the main benefits of network tokenisation:
Increased acceptance rates
Network tokenisation gives issuers better visibility over a transaction’s validity and has been shown to result in higher acceptance rates. In fact, Visa reports that network tokenisation can increase authorisation rates by an average of 2.1%.
Encourages repeat purchases
Scheme tokenisation promotes one-click payments by allowing customers to securely save their payment card details for future use. By replacing sensitive payment data with secure tokens, it reduces friction during the payment process and increases brand loyalty.
Streamlined payment processing
With network tokenisation, the responsibility for token maintenance lies with the card scheme, ensuring automatic updates to card information in the case of expiration or card replacement. This proactive approach eliminates the need for payment data to be tokenised again, resulting in streamlined payment processing for merchants.
Increased security
Network tokens ensure robust protection throughout the entire transaction process, safeguarding the customer's data with end-to-end security measures. Additionally, in customer-initiated payments, a one-time-use cryptogram is employed. This cryptogram is a unique code generated for each transaction, providing a single-use authentication mechanism. By requiring a new cryptogram for each transaction, it significantly enhances security by preventing unauthorised use of payment data, thereby bolstering protection against fraudulent activities.
How emerchantpay can help you?
Network tokenisation emerges as a transformative solution for businesses striving to offer smooth payment experiences, enhance security and streamline payment processes. By replacing sensitive card numbers with tokens, network tokenisation not only protects customer data but also reduces the compliance burden for businesses.
With over two decades of experience, emerchantpay is at the forefront of payment innovation, helping businesses to adapt their payment offerings in line with modern consumers. We can help your business to leverage scheme tokenisation to tap into new markets and optimise your revenue.
Get in touch with our team to learn more about the benefits of scheme tokenisation today!