The Truth About Network Tokens: Key Insights from Industry Experts

With its potential to improve authorization rates and reduce fraud, network tokenization has emerged as a critical innovation in the payments industry, with merchants increasingly seeking to understand its implementation and benefits. But is it worth the hype? Industry experts gathered to discuss this technology's impact, adoption challenges, and future outlook.

Check out the clips and summaries below, or watch the entire webinar replay for an in-depth discussion on network tokenization.

Authorization Rate Improvements:

• Visa reports 4.7% uplift in authorization rates
• Mastercard reports 3% improvement

Fraud Reduction:

• Visa reports 34% reduction in fraud when compared to traditional credit card transactions
• Mastercard reports 50% reduction when compared to traditional credit card transactions

Network tokens differ from gateway or acquirer tokens in several key ways:

• Network tokens require participation from all parties in the payment chain.
• They offer built-in card lifecycle management, so card details are always up to date.
• Portability of a network token depends on how it is obtained. If subscribed through an acquirer/gateway, the token likely only works on that acquirer's flow. 
• Can be portable across acquirers when implemented through orchestration platforms.
• The transaction request ID (TRID) owner dictates the processing capabilities

Implementation of Network Tokens comes with its own set of challenges, including: 

• Slower adoption rate by some more established acquirers and issuers due to complexity integrating with legacy systems.
• Acquirers need an incentive or push from their merchants to implement network tokenization.
• Evolving regulatory and compliance standards around tokenization.
• Cost considerations for smaller acquirers.
• Not a mandatory requirement like 3DS has become in Europe.

Despite those challenges, the industry is moving toward complete adoption of network tokenization:

• Card schemes aim to eliminate raw PANs by 2030, further boosting network tokenization’s use case as a secure stand-in for sensitive payment card data.
• Network tokenization adoption will grow as integration with digital wallets and emerging payment methods becomes more widespread.
• Network tokens will offer enhanced security when combined with other leading-edge technologies such as biometrics and behavioral risk models.

Here are some recommendations from industry experts: 

• Lean into available network tokenization incentives
• Consider orchestration platforms for token portability
• Verify acquirer capabilities for network token processing
• Implement proper fallback strategies
• Maintain control over payment flows through orchestration

Network tokenization is a major leap forward in payment security and efficiency, offering substantial benefits for merchants, particularly those with subscription-based models. While adoption challenges persist, especially in Europe, the technology’s advantages are expected to grow as the ecosystem matures and more stakeholders embrace it.

To stay ahead, merchants should adopt network tokenization now, even before it becomes mandatory. Leveraging an agnostic orchestration layer ensures flexibility and data control, while a strategic approach combining network tokens, universal tokens, and a token vault enhances security and better transaction success rates. Merchants should actively engage with their acquirers and remain open to testing emerging payment innovations. By taking proactive steps now, merchants can gain a competitive edge by leveraging their payment systems while reducing fraud and optimizing the customer experience in an increasingly digital economy.