The use of tokenization is increasingly important to avoid fraud, protect user data, and increase sales
Tokenization has become increasingly important for digital payments in recent years and today, with Covid-19, it has become crucial.
Due to the pandemic, consumers have paid almost all their expenses digitally in recent months. The growth is so much that digital commerce and mobile payments transactions are forecast to reach nearly $ 900 billion this year, in the United States alone.
This situation underscores the urgent need to take advantage of the benefits offered by tokenization, a security process that continuously encrypts card information to avoid duplication or other intrusions.
However, since tokenization technology is still growing in usage, the pandemic offers a good moment to reflect on its importance and the benefits it offers: greater security, a better user experience and, in the end, more products sold.
Let’s look at each point in detail.
CNP transactions: Safer, with tokenization
The payment ecosystem is increasingly virtual, but debit and credit cards continue to play a leading role. Even mobile payments – from virtual wallets – are often connected to a card.
As a result, the use of tokenization is key, since it safeguards the user’s sensitive information, replacing the card number with a temporary, random number with similar characteristics.
In this way, tokenization offers a security resource for card not present (CNP) transactions, which have increased considerably during the pandemic.
How does tokenization increase security so much? Above all, because it does not expose card data during the purchase process. Throughout the protection and verification process, the merchant will never see the user’s card number, even in the final payment transaction.
There is simply no opportunity for the data to be stolen from merchant systems for fraudulent purposes.
Improving UX with tokenization
Tokenization is also extremely important for reducing friction during the shopping experience.
Tokenization provides a significant increase in security for recurring payments – for monthly subscriptions, for example – and payments by mobile wallets. That increase in security makes the digital shopping experience easier for the user: they encounter fewer steps, fewer additional verification questions and less chance of having their purchase rejected.
With a better UX, the opportunities to close the sale increase. In addition, the customer walks away satisfied with the experience, and eager to buy again through the same channel.
How Tokenization Increases Sales
Customer satisfaction alone will grow sales. In addition, due to its security, tokenization significantly reduces denial rates in digital payments.
An estimated 40% of digital sales are rejected on suspicion of fraud. Tokenization, by substantially eliminating the risks of exchanging sensitive data, could raise authorizations by 30% to 35%. In other words, it could facilitate the approval of more than 90% of digital purchase attempts.
Much More than Security
Although tokenization has always been discussed as a security tool, it is one that offers a range of benefits for every participant in a transaction.
Tokenization doesn’t only protect customer data, but can also fuel an increase of millions of dollars in transactions for the benefit of banks and businesses, drive higher purchase guarantees, stronger and faster networks, and generate greater confidence in the mobile payments ecosystem – a goal that we are all aiming for.