Unlocking the Power of Network Tokens: Why a Multi-Tiered Approach is Essential for Modern Payment Systems - Webinar Recap

Merchants are under increasing pressure to improve customer experience, reduce fraud, and stay ahead of regulatory requirements. Tokenization—a security method that replaces sensitive card information with unique tokens—has emerged as a critical solution. However, relying on PCI tokens is not enough, it’s important for a merchants to focus on payment optimization tokens as well. This blog explores the importance of using both universal and network tokens to optimize payment systems, minimize risks, and future-proof operations.

Catch the full webinar recording below.

Network tokens are digital versions of a card's Primary Account Number (PAN), and they’re provisioned by the issuing bank or a payment network. These tokens can enhance security, increase approval rates, and simplify customer experiences by securely storing card data for future transactions. According to insights from industry experts, in markets like the U.S., Europe, and Australia, adoption of network tokens is on the rise, with over 80% of issuing banks provisioning them. However, despite their increasing popularity, network tokens alone are not always enough to meet all business needs.

For example, in the U.S., 80-89% of issuing banks support network tokens, but what about the remaining 10-20% of transactions that aren't covered? This is where universal tokens come in, filling the gaps left by network token provisioning and ensuring a seamless payment experience.

When businesses look at tokenization, they often focus on reducing their PCI scope—a major compliance burden. However, as Brie O’Brien, a payments expert, explained, relying solely on network tokens may not be enough to achieve comprehensive compliance and security. "If eliminating PCI scope is your primary objective, you’ll need both universal tokens and network tokens. Not every card can be provisioned for a network token, and that’s where the universal token comes in."

This dual approach allows businesses to handle cards that aren't eligible for network tokenization and offers greater flexibility, ensuring that either the PAN or the network token can be used dynamically depending on the situation.

Security is a top priority for any organization processing payments, which is why Point-to-Point Encryption (P2PE) plays a crucial role in securing transactions. P2PE encrypts sensitive card data at the point of entry, such as a POS terminal, ensuring that information remains protected until it reaches the payment processor for decryption.

The ability to combine P2PE with network tokens is an added layer of security. For example, when IXOPAY processes a card-present transaction, they decrypt the data in a PCI-certified secure environment and issue a universal token. From there, a network token can also be provisioned, providing businesses with an extra layer of security. This hybrid approach ensures that businesses can benefit from both network tokenization and encrypted card data at the terminal, significantly reducing the risks associated with payment processing.

Businesses face stringent compliance requirements, particularly under the PCI DSS (Payment Card Industry Data Security Standard). Many merchants ask about the specific responsibilities they must manage versus what their payment platform, such as IXOPAY, handles.

IXOPAY, being a PCI DSS Level 1 certified platform, covers key technical and operational aspects such as the secure storage of sensitive payment data, encryption, tokenization, and server integrations. However, merchants still have responsibilities, such as implementing proper security practices on their systems. A PCI DSS responsibility matrix helps delineate these roles, ensuring clarity for businesses navigating compliance requirements.

One often-overlooked benefit of tokenization is its impact on loyalty programs. By integrating network tokens with loyalty programs, businesses can better track and understand customer behavior across multiple channels. The Payment Account Reference (PAR), a unique identifier included in network token metadata, maps back to the cardholder’s account regardless of changes to the card itself. This means that even if a customer gets a new card number or expiration date, their loyalty profile remains intact, providing valuable insights for marketing and retention strategies.

As Brie pointed out, some companies have even used network tokens to help marketing teams understand complex customer behavior across different brands or payment channels. "We've worked with these teams to better curate marketing messages so they can understand their customers' buying habits within a complex payments space," she explained.

One common question businesses have when considering network tokenization is its cost. Yes, there is an additional expense involved in provisioning network tokens, but the return on investment (ROI) is usually well worth it. Higher acceptance rates and lower interchange fees are two significant benefits that directly impact the bottom line. These factors, combined with better fraud protection, make network tokenization a smart investment for companies seeking long-term growth.

As companies evaluate the cost of implementation, IXOPAY works closely with clients to build a custom ROI model. This model includes not only the upfront costs but also the resource commitment and expected gains from using network tokens. For most businesses, the impact on acceptance rates and interchange fees alone makes the investment more than feasible.

The payments ecosystem is rapidly evolving, and businesses need to stay ahead of the curve by adopting robust, future-proof solutions. By leveraging both network tokens and universal tokens, companies can optimize their payment infrastructure, reduce fraud, and ensure PCI compliance. The ability to combine tokenization with P2PE and other security measures adds an additional layer of protection, making this multi-tiered approach essential for businesses that want to thrive in today's competitive environment.

As regulatory requirements become more complex and customer expectations for seamless, secure payments increase, businesses that take a proactive approach to tokenization will be well-positioned for success.

If you're interested in learning more about how network tokenization can benefit your business or have questions about implementing network tokens, feel free to reach out to your client success manager or account manager. Stay tuned for more insights as we continue to explore the future of payments.