Acquirers Turn to Tokens to Tackle Fraud, Streamline Payments

In the report “Bridging the Gap: Helping Acquirers Meet Evolving Merchant Demands,” a joint effort between PYMNTS Intelligence and Visa Acceptance Solutions, we found that “unified” commerce can improve interactions between merchants, acquirers and consumers.

For consumers, the ease of a digital-first shopping journey is brought into the brick-and-mortar environment, speeding up transactions. The merchants enjoy higher conversion rates, and the acquirers, supporting cross-channel efforts, cement strong relationships with those merchants.

Forging a unified continuum of shopping interactions is no easy task. The data shows that overall, 1 in 4 acquirers are not confident in their ability to provide that intuitive journey. The level of ability declines significantly depending on the size of the acquirer: Only 10% of those processing less than $1 billion per year feel confident about supporting cross-channel shopping experiences, which highlights the need for small acquirers to leverage the expertise of third-party solution providers.

What’s Top of Mind

Complexity and fraud remain top of mind for just about everyone, given the fact that, according to 95% of acquirers, the complexity of managing multiple sales channels is a key challenge for merchants. A full 72% of the 200 acquirers surveyed said that payment and fraud management issues are headwinds to unified commerce. Stronger encryption and tokenization, cited by 69% of acquirers, can help improve security.

Tokens can boost conversion rates, too. Our research identified 24 payment-related features as important to a large percentage of merchants. The average “offer” from acquirers spanned 16 of those 24 attributes — but acquirers processing less than $1 billion in transactions annually offer 13. Overall, 66% of acquirers offer tokenization — and API connectivity can help implement that functionality.

Tokenization improves security by giving the consumer’s card, whether debit or credit, a string of characters that substitute for a card’s 16-digit string of details. The token can travel with consumers across their interactions with merchants, and also offer the ability for forward-thinking enterprises to craft loyalty and rewards programs.

In terms of streamlining checkout and improving sales, the merchants can keep the tokens on file, which in turn keeps customers from having to enter their card details for a given transaction online or in the aisles, paving the way for one-click checkout. Reduced false declines also eliminate friction in the process, while fostering customer loyalty to merchants.

In separate data detailed by Visa, the payments network stated that token-based transactions drive a 30% reduction in fraud online versus PAN (16-digit card number) and a 4% uplift in authorization against a backdrop where as much as 44% of digital transaction abandonment can be tied to friction in the payments process.

For online, card-not-present transactions, Visa has said that there is a more than 3% boost in authorization rates when tokens are used in card-not-present settings. In the event of face-to-face commerce, tap-to-pay transactions are tokenized payments. The rise of mobile wallets also offers a growth engine for tokenized payments, as the tokens can be stored in those wallets.