What is Network Tokenization?

Network tokenization masks the card owner’s Primary Account Number (PAN) and replaces it with a network-generated, unique, non-sensitive token. This security measure can impact attempts to obtain payment information without authorization. Use of network tokenization is a necessity with transactions involving card-not-present and digital commerce, as well as those with recurring billing, which are more prone to fraudulent attacks, and when the underlying card is no longer valid while the token is, as the token remains a valid means of payment regardless of the status of the original card.

When the card owner registers the card electronically or through their digital wallet, these actions trigger a request to the corresponding Token Service Provider (TSP) of the card network the owner used.

작동 방식:

• The token-requesting merchant’s payment system requests from the Token Service Provider (TSP) a token that will replace the PAN.
• The TSP issues a unique and opaque token and records the relationship between the PAN and Token in a secure vault.
• The issuer or the network may decide to approve/token issuance after carrying out a risk assessment.
• The consumer makes payment; the token is sent to the merchant as a dynamic, cryptogram, single-use, one-time token that replaces the genuine card.

Network tokenization influences cleared-speed payments, fraud event probability, and patterns of legitimate payment rejections.

Visa reports (data):

• 4.6% rise in payment authorization for card-not-present transactions
• The observed fraud rate in tokenized transactions was 30% below a corresponding value.
• Conducting a transaction with another network member can impact the applicable costs and fees.

For a merchant, the duration of customer checkout and any subscription interruptions from card changes may be linked to their 장바구니 포기 statistics and the volume of customer support interactions.

Network tokenization matters most wherever card details are stored and reused repeatedly. Common use cases:

• E-commerce and recurring/subscription billing
• 인앱 및 디지털 지갑 거래
• SaaS 청구

Implementing or removing the solution involves operational factors for merchants to consider.

• The merchant’s system should not only accept payment by tokens, but it should also be able to fall back to an alternative in the case the merchant payment system fails or gets a request to process an untokenized transaction.
• For domestic transaction processing in accordance with debit routing rules, the merchant’s system should be compatible (especially if it is a US Merchant).
• The speed of acceptance by issuers may vary, influenced by both regional factors and payment method.
• The main considerations when choosing whether to adopt network tokenization include the complexity of the integration, its portability, and whether or not it results in a vendor lock-in situation.
• The relationship between initial capital spending, varying issuer support, and authorization outcomes in particular markets merits attention.