This follow-up session explored implementation strategies, benefits, and practical considerations for merchants looking to leverage tokenization technologies in their payment ecosystems.
JC McCracken, Senior Solution Architect at IXOPAY, clarified the fundamental difference between network tokens and universal tokens. Network tokens are provided by card brands (Visa, Mastercard) and remain tokenized throughout the entire payment flow, protecting the ecosystem from potential security breaches. Universal tokens, on the other hand, are proprietary tokens that provide merchants with flexibility across multiple PSPs and reduce PCI scope. Kiel Cook, Principal Product Manager, emphasised that universal tokens offer customisation options and simplification, serving as a ‘one-to-many’ reference point that can link to both clear PANs and network tokens.
Network tokenization offers tangible benefits, particularly for recurring transactions and merchants with repeat customers. The panel highlighted that Visa currently offers a 10-basis-point interchange reduction for network token transactions. Andrew Sjogren, Product Marketing Lead, noted that while some publications claim authorisation rate lifts of 200-400 basis points, actual improvements vary significantly by sector and region. The experts emphasised that implementation doesn't increase PCI scope, as network tokens aren't considered cardholder data, though they do require careful handling since they are BIN-compliant.
A key advantage of network tokenization is supposed portability across platforms, but the panel clarified important nuances. McCracken explained that while network tokens were originally designed to be portable, their implementation often depends on the business model of your payment service providers. Some PSPs may not support third-party network tokens as a business strategy to keep merchants within their ecosystem. IXOPAY's model allows merchants to maintain ownership of their tokens, functioning as a ‘translator’ between merchants and their chosen PSPs.
Network tokens (provided by card schemes) and universal tokens (provided by token service providers like IXOPAY) serve different purposes and can be used complementarily for maximum benefit.
While network tokens don't increase PCI scope, their LUN-compliant format requires careful implementation to avoid flagging during security audits.
Visa currently offers a 10-basis-point interchange reduction for network token transactions in North America, with other card schemes potentially following suit.
Network token adoption varies significantly by region, with higher implementation rates in the US compared to the EU due to market forces rather than regulatory mandates.
The true value of network tokenization depends on merchant-specific factors, including business model, customer patterns, and regional variations in issuer/acquirer readiness.
As network tokenization continues to gain traction, with Visa targeting 80% of transactions as network tokens by 2030, merchants must evaluate their specific needs and business models to determine the best implementation strategy. The experts emphasised the importance of understanding your transaction data and customer patterns before diving in. By combining network tokens with universal tokens and selecting the right token service provider, merchants can maximise security, improve authorisation rates, and maintain flexibility across their payment ecosystem, all while preparing for a future where tokenization becomes the standard rather than an option.
This presentation only highlights the key points of the discussion, to get the full scoop on network tokenisation, watch the webinar recording here.
Vlad is a Senior Editor at The Paypers, working in the Banking & Fintech team. He uses his research, content, and people skills for all activities revolving around Open Banking and Open Finance. Vlad has a degree in Biology and Molecular Genetics and an extensive background in creative writing. You can reach out to him on LinkedIn or email.
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