A frictionless checkout experience and a need for data security and portability are crucial concerns for retailers and consumers alike. On one side, consumers demand payment optionality at checkout, while on the other, retailers strive to meet that challenge by utilising various payment service providers (PSPs) and payment methods.

It’s no wonder, then, that at the heart of tokenisation and data portability, payments play a pivotal role, as the total volume of tokenised payment transactions will surpass 1 trillion by 2026. When data breaches abound,
and PSP (payment service provider) restrictions exist, how can retailers prioritise tokenisation and data portability to create a cohesive checkout and payment experience?

Tokenisation for Optimisation

Tokenisation is not new, but today’s retailers stand to benefit from the technology, as losses from online payment fraud will exceed $362 billion globally over the next five years.

Why? Tokenisation allows retailers to forego the traditional route of storing sensitive card details and replace that data
with tokens that enhance security and portability.

These digital identifiers replace card data during transactions, ensuring bad actors cannot access and use the information. The tokens can also securely pass through multiple systems without worry as information is locked down.

Retailers who leverage network tokens also stand to benefit from increased authorisation rates. In 2020, Visa’s Token Services showed an uplift of 3.2% in authorisation rates. It’s important to note, however, that not all tokenisation approaches are equal when it comes to tokens and data portability.

Data Portability Behind the Checkout

One of the main things retailers must consider with data portability is the restrictions that can come with growth. Retailers who tokenise card data with PSPs will find that card data is replaced with PSP-specific tokens sent on every request rather than relying on original card data.

Storing card data with a single PSP can severely limit data portability for retailers. Instead, retailers should utilise network tokenisation, which extends on the idea of PSP tokens by allowing retailers to send card data to a network tokenisation service
to determine what scheme to connect with to issue a network token.

More importantly, retailers that take advantage of network tokens can quickly switch between different PSPs without worrying about migrating sensitive card data, which is vital for maintaining flexibility during changing market conditions.

How To Take Action

Retailers who want to capitalise on data portability need to consider who owns the token – the retailer or the PSP.

For retailers that want maximum flexibility, an external vault is necessary for tokenisation, as an external vault generates tokens that belong to the retailer
and can be taken anywhere, anytime. These tokens can also be used in a vault provider’s system or externally with a service provider to ensure that portability and ownership coexist for optimal agility.

Keeping card data within an independent cloud vault also allows retailers to instantly process card data with any PSP without migration issues, as a cloud vault securely stores card data and helps guarantee PCI compliance. Retailers can also use this data to process payments with any PSP, routing card data on demand to a preferred processor based on cost, preference, location, and a multitude of other factors.

While understanding what goes on behind the consumer checkout is not always easy, retailers who implement a comprehensive tokenisation and data portability strategy will be able to decrease security threats while delivering a consumer checkout experience that keeps customers coming back to buy.

Interested in learning more about payment orchestration? Download this e-commerce merchant’s eGuide to payment orchestration to discover which platform is best for your needs.

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This article was first published by Gr4vy and has been republished on our website with permission.

Gr4vy is a member of our Payments Orchestration Panel and Token Vault Panel.

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