On average, 15% of recurring payments are declined due to outdated card details, such as expired cards and reissued account numbers. For many merchants, particularly those processing recurring transactions, these failed payments can disrupt cash flow, increase customer churn, and lead to costly recovery efforts. Network Tokenization offers a solution by replacing sensitive card data with secure, up-to-date tokens, ensuring payment continuity and reducing decline rates.
At Acquired.com, we’ve integrated directly with Visa and Mastercard to enable Network Tokenization for our merchants without any additional integration effort. This capability has already delivered tangible results, with merchants using our Network Tokenization feature experiencing an average 3% increase in authorisation rates. Let’s explore how Network Tokenization works and why it’s a game changer for businesses in the financial services sector.
What is Network Tokenization?
Network Tokenization replaces a cardholder’s primary account number (PAN) with a unique digital token for payment processing. Unlike other tokenization solutions, network tokens are issued and managed directly by the card networks, such as Visa and Mastercard. These tokens are unique to the business, device, or transaction schedule, adding an extra layer of security and ensuring that only authorised merchants or cardholders can use the token for payment.
Challenges Facing Financial Services Businesses
Financial services businesses, especially those providing lending products, operate in a uniquely challenging landscape. They must manage high-value transactions, maintain compliance with stringent security standards, and ensure seamless customer experiences—all while navigating the complexities of payment processing. Network Tokenization emerges as a transformative solution, addressing these pain points while unlocking tangible benefits.
Tackling Payment Failures in Recurring and High-Value Transactions
Lending merchants often handle recurring payments for loan repayments or large, one-time payments when customers pay down significant portions of their loans. However, payment failures, whether due to insufficient funds or outdated card details, can disrupt cash flow, increase operational costs, and hinder customer relationships.
Network Tokenization offers a significant advantage here. By dynamically updating card details when changes occur, such as a reissued card or an account update, businesses can process transactions with the most accurate information. This minimises declines, ensuring payments go through as expected. Businesses leveraging network tokens report an average 3% increase in authorisation rates, translating directly to higher revenue and better customer retention.
Navigating Card Expiry and Customer Account Changes
Card expiry or changes in customer account details are inevitable, yet they pose significant hurdles for merchants. Failed payments lead to service disruptions and increase the likelihood of customer churn, particularly for subscription-based or recurring payments.
With Network Tokenization, these obstacles are seamlessly addressed. Tokens tied to customer accounts are continuously refreshed, enabling uninterrupted payments even when card details change. This creates a frictionless experience for customers, reducing involuntary churn and fostering long-term loyalty.
Enhancing Security and Fraud Prevention
Handling sensitive payment information is a heavy responsibility, particularly in an era of rising cybercrime. A breach can result in severe financial penalties and irreparable damage to a merchant’s reputation.
Network Tokenization provides robust security by replacing card details with unique, merchant-specific tokens. Even if intercepted, these tokens are useless outside the designated environment, significantly reducing the risk of fraud. Not only does this ensure compliance with security regulations, it also protects customer trust, a non-negotiable for any financial services business.
Staying Ahead in a Rapidly Evolving Payment Landscape
The digital payments ecosystem is evolving at speed. New technologies like digital wallets and other devices using the internet to take payments are reshaping consumer expectations. Financial services merchants must adapt to these trends to remain competitive.
Network Tokenization is future-proof, designed to integrate seamlessly with emerging payment methods developed by the card networks. By adopting this technology, merchants are better positioned to support innovations and provide the frictionless experiences customers demand.
What Businesses Should Know About Network Tokenization
For financial services businesses, adopting Network Tokenization is a strategic move to improve payment success rates, enhance security, and streamline customer experiences. However, the effectiveness of this technology and its financial implications depend on the capability provided by your Payment Service Provider (PSP). Here are the key questions merchants should ask to ensure they fully leverage the benefits of Network Tokenization.
Does the PSP Support Network Tokenization?
For merchants processing recurring payments, Network Tokenization is not just a value-add; it’s becoming a financial necessity. Visa and Mastercard impose an additional Non-Secure Scheme Fee on merchant-initiated transactions that are processed without network tokens. This fee is designed to incentivise secure payment practices and can significantly increase operational costs for merchants not using tokenized solutions.
Ensure your PSP supports recurring payments with Network Tokenization to avoid these additional fees and protect your bottom line.
Is the PSP Integrated Directly with Card Networks?
Not all tokenization solutions are created equal. Network tokens issued directly by card networks like Visa and Mastercard are more reliable and widely accepted than third-party tokenization systems. These tokens are continuously updated with the latest account details, ensuring fewer declines and higher authorisation rates.
Ask your PSP if they are directly integrated as a Token Service Provider (TSP) with major card networks. This direct connection guarantees better reliability and a seamless experience for both merchants and customers.
How Easy Is It to Adopt Network Tokenization?
Businesses should seek a solution that minimizes complexity and avoids the need for significant technical investments or infrastructure changes. At Acquired.com, we’ve integrated Network Tokenization directly into our payment gateway, simplifying adoption and ensuring that merchants can start reaping the benefits immediately.
Ensure your PSP provides a turnkey solution that allows you to enable Network Tokenization without additional operational burden.
Does the PSP Offer Analytics and Reporting?
Understanding the impact of Network Tokenization is crucial. Look for a PSP that provides robust reporting and analytics on metrics like authorisation rates, token creation, and payment performance. This transparency enables you to measure the ROI of Network Tokenization and identify areas for further optimisation.
Is the Solution Future-Proof?
The payments landscape evolves rapidly, with new technologies and customer preferences emerging regularly. Ensure your PSP’s Network Tokenization solution supports major card networks and they are aware of upcoming changes in the industry. A future-proof solution will keep you ahead of trends and ensure you’re prepared for the next wave of innovation.
The Results
The results speak for themselves. Merchants using our Network Tokenization solution have experienced:
- A 3% increase in authorisation rates, resulting in measurable revenue growth.
- Reduced churn from failed payments due to card changes or expirations
- Reduced churns due to soft declines such as “do not honour” and “suspected fraud”
- Enhanced security, giving customers peace of mind and strengthening trust in their brand
For a lender processing millions of pounds in recurring payments, these benefits add up quickly. A small improvement in authorisation rates can mean the difference between stagnation and significant growth.
Network Tokenization is not just a technical feature, it’s a strategic advantage. For financial services businesses, particularly those in lending, this technology addresses critical pain points while driving revenue and enhancing customer relationships.
At Acquired.com, we’re committed to empowering merchants with the tools they need to succeed in today’s competitive landscape. Our Network Tokenization solution is designed to be seamless, effective, and tailored to power recurring commerce.
