What is Network Tokenisation?
Network tokenisation is a secure way of handling payment card information, where networks like Mastercard, Visa, American Express, and Discover replace sensitive card details (the Primary Account Number, or PAN) with a unique token. This token, provided by the card brand, protects the cardholder’s information by removing the need to store the actual PAN.
This secure approach benefits merchants by enhancing transaction success rates, reducing fraud, and offering customers a smoother payment experience. For instance, if a customer’s physical card is compromised, network tokenisation ensures their payment details stay up-to-date and functional, reducing the hassle of declined transactions.
The Difference Between Network and PCI Tokenisation
Network tokenisation and PCI tokenisation offer different benefits. PCI tokenisation replaces the PAN at a specific endpoint, whereas network tokens work across the entire payment process. Network tokens are domain-specific, meaning they are restricted to a particular merchant or device, making them ideal for use with mobile payments like Apple Pay or Google Pay. This targeted approach makes network tokenisation especially secure, as it prevents tokens from being used outside the intended environment.
Why Network Tokenisation Matters for Today’s Digital Transactions
Consumer spending has shifted significantly toward digital channels, with eCommerce transactions growing rapidly. Alongside this growth, fraud rates have risen, adding pressure on merchants to secure transactions while providing a smooth payment experience. Network tokenisation provides a key tool in this balance, enabling safer, quicker, and more reliable transactions.
The Benefits of Network Tokenisation
- Enhanced Security
With network tokenisation, sensitive card data is replaced with a secure token that can’t be accessed or misused by others. Each transaction is authenticated with merchant-specific details, offering a level of security that standard PCI tokens don’t match. This process keeps payment data out of reach of potential breaches and fraud, helping merchants meet compliance and security standards effortlessly. - Reduced Declines and Increased Authorisation Success
Studies show a 2.1% boost in authorisation rates with network tokenisation compared to traditional card numbers. By eliminating issues around lost or expired cards, network tokenisation keeps transactions flowing smoothly, saving businesses from the revenue loss caused by false declines and expired cards. This improvement not only benefits the business but also enhances the overall customer experience. - Fraud Reduction
Fraud costs UK merchants billions annually, and network tokenisation helps mitigate this risk. The tokenised data, even if accessed, is useless to fraudsters, as it cannot be used outside its designated merchant or device environment. This extra layer of security protects both the business and its customers, offering a safe and seamless digital transaction environment. - Streamlined Checkout Experience
Network tokenisation provides a faster, frictionless checkout process. Customers avoid the hassle of re-entering payment details due to expired or compromised cards, making it easier to complete repeat purchases. Additionally, fewer declines lead to greater customer loyalty and satisfaction. - Simplified PCI Compliance
By minimising the handling of sensitive data, network tokenisation eases the burden of PCI compliance. Tokens are non-sensitive, so businesses can store and process them securely without being subject to the full PCI DSS requirements. This streamlining reduces security overhead, allowing businesses to focus on operations and growth. - Cost Savings
Visa and other card networks have introduced higher fees for non-tokenised transactions, making network tokenisation a cost-saving measure as well as a security enhancement. By adopting network tokenisation, merchants can avoid additional charges, maintain compliance, and protect their bottom line. - Improved Subscription and Recurring Payments
For businesses with subscription models, network tokenisation is particularly valuable. Tokens allow transactions to continue seamlessly even if a card is lost or updated. This means fewer payment disruptions, higher authorisation rates, and ultimately, increased customer retention.
Key Uses for Network Tokenisation
Network tokenisation supports a range of business models and industries:
- E-commerce: Tokenisation keeps saved cards secure for repeat customers.
- Mobile apps and digital wallets: Enables secure in-app transactions for customers who save their payment details.
- Subscriptions: Reduces the need for customers to update expired card information, keeping subscriptions active.
- Gig-economy: Ensures secure, seamless payments for repeat customers.
Why is Network Tokenisation Safer?
Network tokenisation adds a robust layer of security by replacing sensitive card details with unique tokens tied to a particular merchant or transaction type. These tokens are based on EMVCo standards, giving both merchants and customers confidence in their security. In the event of a data breach, tokenised information is of no use to attackers, as it cannot be used outside the designated context.
When Should Merchants Consider Tokenisation?
The answer is simple: now. Businesses already benefit from the streamlined security and reduced risks offered by network tokenisation. Waiting to adopt it can put both businesses and customers at risk of fraud, card data breaches, and the inconvenience of re-entering updated card details.Transition When Switching Payment Providers
When switching payment providers, tokenisation can play a crucial role in ensuring a seamless transition and maintaining security. By using tokenisation, businesses can avoid the need to re-enter sensitive card data, which would otherwise expose them to additional risks and potential disruptions for customers. Network tokens are specific to a merchant and device, meaning they can be securely transferred to the new provider without exposing customer card details. This simplifies the migration process, reduces the risk of payment interruptions, and preserves the trust customers have in the business. Moving providers with tokenised data also allows businesses to continue benefiting from higher authorisation rates and reduced declines, as customers’ details remain up-to-date without requiring manual updates. With tokenisation, changing providers becomes more efficient, less risky, and far easier for both the business and its customers.
Does Tokenisation Ensure PCI Compliance?
While network tokenisation does not automatically make transactions PCI compliant, it significantly reduces the compliance scope. By using tokens instead of storing sensitive payment data, businesses can simplify their PCI requirements, reducing both cost and complexity.
What’s Next for Network Tokenisation?
Tokenisation is already extending beyond payment data, with industries like healthcare and real estate adopting it to secure other forms of sensitive information. Looking ahead, network tokenisation may soon incorporate identification data, enabling more personalised and secure customer experiences across sectors.
Final Thoughts
Network tokenisation is essential for any merchant seeking a secure, seamless digital payment experience. As eCommerce continues to grow, businesses need secure and efficient transaction processes to stay competitive. For further guidance on implementing network tokenisation, contact our payment experts and discover how it can benefit your business today.
