Visa Puts Tokenization at the Center of Frictionless Checkout

While retailers and card networks have made strides in merging card-present and card-not-present payment experiences, the essence of unified commerce extends beyond transaction processing.

Unified commerce has become a goal, Matt Swatzell, head of Solutions, North American Acceptance at Visa, told PYMNTS as part of the “Rise of the Mobile-First Shopper” series, and it’s one that is focused on the customer.

“We talk about omnichannel commerce, but what we’re really talking about is not only card-present and card-not-present transactions but a layering on every other element of a merchant’s relationship with their consumers,” Swatzell said, touching on rewards and loyalty programs, consumer preferences and prior purchasing history.

Defining Unified Commerce

Unified commerce strives to centralize all customer data and interactions to create a truly holistic view of the customer, influencing every transaction. However, the ambitious nature of this vision is matched by execution difficulties. Swatzell pointed to two primary obstacles. “One is the infrastructure needed to support this,” he said, adding as an example “the number of partners and tech systems and internal connectivity you need to build out to understand token X for consumer Y is actually related to loyalty program A over here.”

He added that beyond the technical heavy lifting, there’s a challenge in simply understanding how these varied pieces of information relate to one another. “I may use five different payment credentials across three different purchasing methods or form factors with the same merchants. If I don’t provide a login detail or a phone number or some other sort of master key around this, how can you, as a retailer, link all that information together and provide that true omni experience?”

From a technological and infrastructural standpoint, several weak points often impede retailers. Swatzell identified three key areas of challenge: the systems themselves, the partner ecosystem and the pace of innovation. Many retailers, even the most sophisticated, must grapple with customer information residing in five or six different databases.

The pace of change — from new payment methods and evolving consumer behaviors to the emergence of loyalty programs — means that a long-term, rigid implementation strategy is doomed to obsolescence. “This isn’t a world where you can go and say, ‘I have a North Star in mind. I’m going to take the next four years to get there,’ because in four years, the landscape will look radically different than it does today in terms of consumer behavior and consumer expectations,” the Visa executive said, underscoring the need for agility.

Infrastructure Reconfiguration

There are more mobile-first consumers within brick-and-mortar environments. This presents an opportunity for retailers to deliver tailored recommendations, marketing messages and engagement directly to consumers in real time, a capability previously constrained by the divide between eCommerce and physical retail. The ability to suggest complementary items based on past purchases while a customer is browsing in-store represents a new frontier for personalized commerce.

The primary objective is to link identity and purchase history. The subsequent step involves connecting this linked profile to their preferred payment methods, eliminating any friction from the transaction process. This comprehensive linking and identification necessitate a reconfiguration of existing infrastructure, moving away from siloed systems toward a unified data architecture that can connect online behavior with in-store presence and past transactions, Swatzell told PYMNTS.

An inconsistent model, where customer data is fragmented across various systems and channels, hinders a retailer’s ability to provide the personalized experiences that consumers now expect.

If a loyalty program cannot communicate with payment tokens, or if a customer’s online browsing history is disconnected from their in-store activity, the merchant misses opportunities for targeted engagement and upselling.

In addition, the lack of agile infrastructure and the inability to quickly adapt to new payment methods, consumer behaviors, and loyalty programs means that retailers risk falling behind competitors.

Strategic Role of Partnerships

Swatzell said strategic partnerships are not merely beneficial but essential. When considering what specifically to outsource, Swatzell advised a nuanced approach, as merchants must ensure they maintain flexibility and access to their own data, enabling integration and interoperability.

Beyond data access, choosing partners that can grow alongside the merchant is vital. The needs of a small business differ significantly from those of a mid-sized merchant with hundreds of locations, or a large enterprise. If a partner ecosystem cannot evolve, merchants face the daunting prospect of repeatedly reinvesting in infrastructure, he said.

Finally, Swatzell advised against locking into a single vendor that provides an all-encompassing solution. He advocated for partners who offer the flexibility to “plug and play” specific components of the payment stack, allowing merchants to select best-of-breed solutions for unique needs, such as payment tokenization or 3DS transactions, without being forced to consume every service.

Tokenization and Frictionless Checkout

Central to alleviating checkout and payment friction is the strategic application of tokenization. Swatzell pointed to network tokenization. “One of the big pushes that we, at Visa, have is around network tokenization, where that credential will continue to be updated over time and kept current,” he said, sidestepping the scenario where a consumer must retype their information at checkout due to an outdated card.

Beyond tokenization, new methods for merchants to share information with transaction issuers are also contributing to a more streamlined checkout process.

This allows for a reduction in friction that previously might have required a “step-up” authentication, such as a 3D Secure transaction.

As he noted, for the merchants moving to forge smooth unified commerce in true omnichannel fashion, “having [partners] whose core competency is delivering best-in-class experiences, optimizing authorization rates, and meeting merchants where they are in the payment journeys is important.”