1) What Are Network Tokens, and How Do They Work?

Network tokens replace sensitive card information with tokens issued by the major card networks. They update automatically and work across multiple platforms, resulting in enhanced security and more efficient transactions.

Unlike gateway tokenization, which is provider-specific, network tokens are universal. This means they can be used across different merchants and payment providers without requiring consumers to re-enter their payment details for each purchase. 

Network tokens reduce fraud by an average of 28%.

2) What Are the Benefits of Network Tokenization?

Beyond fraud prevention, network tokens offer a lot of great benefits, such as:

• Optimized interchange fees: Because network tokenization is so secure, businesses can often unlock lower processing costs and interchange fees
• Higher authorization rates: Issuers trust transactions that are processed with network tokens, which means fewer transactions will be declined because they seem untrustworthy
• Frictionless payments: Merchants can improve the payment experience with frictionless one-click checkouts
• Automatic card updates: Tokens automatically update when a card is replaced, meaning subscription and recurring payments stay active even if card details change. This also results in fewer declines from outdated or incorrect card details

3) How Do Network Tokens Improve the Payment Experience?

Network tokens create a seamless payment experience for everyone — merchants and consumers alike.

Merchants: With network tokenization, merchants don’t have to worry as much about chargebacks, security, or declined transactions. They also benefit from increased authorization rates, happier customers, streamlined payment processes and fewer disrupted sales from outdated payment details.

Consumers: Network tokenization offers faster checkouts, more reliable subscriptions and reduced risk of card fraud — all huge benefits for modern consumers. With automatic card updates, they also don’t have to re-enter payment details for repeat purchases, creating a smoother, more convenient experience.

4) Who Are Network Tokens For?

Network tokens benefit everyone, from consumers to merchants to payment providers. Here’s a quick breakdown:

• Consumers: Tokenization keeps sensitive payment information safe, so consumers don’t have to worry about their card information being stolen
• Merchants: Network tokens allow merchants to set up one-click checkouts and recurring subscription payments — improving their customer experience from start to finish. Tokenization also enhances security and reduces fraud for businesses of all sizes
• Payment providers: Tokenization enables payment providers like independent sales organizations (ISOs) and payment facilitators (PayFacs) to offer secure payment processing services with higher acceptance rates, automatically updating card data and delivering subscription billing to their merchant customers
• SaaS platforms: Software-as-a-service platforms and similar technology providers can use tokenization to ensure their embedded payment solutions are secure for end-users. As with traditional payment providers, this technology offers higher acceptance rates, automatically updated card data and seamless subscription billing  

Common use cases include ecommerce, subscriptions and digital wallets.

5) How Do Network Tokens Improve Security for Payments?

Network tokens are unique to each device, merchant and transaction. This renders the “tokens” useless to fraudsters. This technology also eliminates the need for merchants to store sensitive payment details. Instead of keeping actual card numbers, merchants only have access to the tokens (which their payment provider securely manages in a protected “vault”). That level of separation between a business and their customers’ sensitive information lessens their compliance burden and makes it easier to meet compliance requirements.

6) How Do Network Tokens Fit Into the Compliance Conversation?

As mentioned in the section above, network tokenization enhances security, but it’s not a standalone compliance solution. Businesses still need to consider how they will comply with regulations like PCI DSS, which outlines the requirements for secure payment data handling.

However, network tokens can help support compliance with other regulations, like the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). Since tokens eliminate the need to store raw card information, they can simplify compliance by minimizing exposure to sensitive data.

7) Can Network Tokens Help Me Save Money?

Network tokens can help businesses and payment providers cut costs in a variety of ways, including:

• Lower PCI Compliance Burden: Without the need to store raw card data, payment providers can minimize security-related costs and liability exposure while streamlining the compliance process
• Lower fraud costs: Fewer fraudulent transactions mean less chargebacks, lower dispute fees, and reduced fraud monitoring expenses
• Reduced interchange rates: Because network tokens are so trusted, many card networks offer lower rates for tokenized transactions. This translates to direct savings for providers who may otherwise absorb interchange costs
• Increased customer retention: Tokenization enables merchants to offer seamless ecommerce payment experiences. Plus, automatic card updates keep subscriptions active, leading to happier, stickier customers

8) When Should I Get Started (and How)?

When it comes to the safety of your business and its customers, the sooner you get started, the better. Implementing this technology early ensures:

• Stronger fraud protection from day one
• Cost savings through better interchange rates
• A frictionless experience for customers

To get started, it’s important to find a payment partner with built-in network tokenization support and a token vault. Look for solutions that offer easy integration, automatic card updates and flexible payment options.

Next Steps: How To Make Network Tokenization Work for You

Network tokens are a game-changer for payments businesses and their customers, offering enhanced security, better authorization rates and sizable cost savings. Businesses that adopt this technology early gain a competitive edge with safer, more efficient transaction processing.

Thankfully, keeping yourself and your merchants safe has never been simpler.

At NMI, we offer a full line of security and fraud protection tools designed to stop fraud in its tracks and make it easier to create a seamless payment experience. With Customer Token Vault, your merchants can access a complete network tokenization solution that ensures they always have access to secure, smooth payment processing.

To learn more, reach out to a member of our team.