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Time for a secure way to support merchants, consumers and IoT payments

Replacing card data with tokens can go beyond security and drive new revenue opportunities.

Toms Jansons / January 08, 2021

Today, cyber-attacks and fraudulent activity is a constant . Protecting sensitive data is imperative. The cost of a leak will be felt financially through fines, blocking and issuing new cards, and informing your customers. The cost to your brand, however, may be even higher, as customers look to switch to ‘more secure’ competitors.

Is it as simple as replacing cards with secure tokens 

Based on our experience, we are convinced that replacing card data with tokens – which replace sensitive data – is the way forward. Why? Tokenization gives you the opportunity to create personalized rules such as limiting the number of times a token can be used or allocating a token to a specific wallet such as Apple or Google Pay. Essentially, you can implement a broad range of rules to meet the needs of your consumers. 

And, as you might expect, the same process can be applied to merchants in case they store card credentials on their side. Not surprisingly, beyond their customer reward programs, many merchants don’t want to store too much sensitive customer data. Therefore, a unique token can be generated and assigned for every merchant that is willing to perform card-on-file transactions – in this way, no card data is recorded by the merchant.  

Industry giants are embracing tokenization 

Merchants like Amazon and service providers such as PayPal are already using tokenization technology. Since it can reduce the scope of PCI-DSS requirements and cost, card organizations are actively proposing their tokenization services on the processing side or payment gateway to help merchants tokenize payments. Scheme tokenization ensures that issuers are always aware to which merchant the token has been issued to and provide this information to the cardholder in their digital channels – internet bank or application. Thus, it creates awareness to cardholder about where he has registered his credentials. 

The other benefit with scheme tokenization is that if transaction data is compromised at any time, you don’t have to go through the costly process of blocking and issuing a new card, you simply close the token and issue a new one. It’s cost-effective and ensures personal data remains secure.  

Major benefits for merchants 

One reason we expect to see a big growth in the use of tokenization for merchants is that it promotes smooth subscription service payments and transactions in the form of card-on-file transactions. Nowadays, people simply want to log their card details with a provider like Netflix or Amazon, and not worry about payments. Through scheme tokenization, payment details are automatically refreshed should a customer lose or have a card stolen, as issuers are obliged to send updates through card networks. The end result is that transaction approval rates are higher, subscribing customers are happier, and turnover is secured for merchants. 

Next steps for tokenization   

We believe that tokenization will get even more traction in the future with the continued growth of the internet of things and always-connected devices, where we will start to see many new opportunities and advancements. The technology has already been embedded in connected cars, where tokens can be used for payment at toll stations and gas stations. 

The next logical step beyond these car-related drive through services, is that you will be able to pay from your home appliances, i.e. your TV or fridge as long as they are connected to the internet. This will add yet another channel for payments beyond an app or online. Obviously, this will make the management of such connected devices – both from the acquirer and issuer perspective – even more challenging.  

As a banks or financial institution, it’s better to prepare in advance for this, rather than having to play catch-up and fall behind competitors.  

Start building the  tokenization platform 

In our experience,  banks that build an inhouse tokenization platform with multiple card schemes quickly get derailed, as each card scheme has its own rules and requirements and merchants generally want to provide all the consumer-preferred payment methods. However, we can help you navigate this by integrating multiple card schemes– we provide you with an all-encompassing tokenization solution.


Related blogs 

A digital card experience for a more profitable future 

Cut the inconvenience. Make authentication a part of the card customer experience.

Don’t just replace a card platform with a new card platform, deliver a completely new experience for your customers instead

Bringing lost revenues back to the cards business via credit services


Learn more on Card and financial product management related blog and insight series, case studies and more - click here.

Toms Jansons
Lead Payments Offering Manager

Toms Jansons currently holds the position of lead strategic product manager and has over 15 years experience in card and payment product development.

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