Why a frictionless online payment customer experience matters
Payment is a critical step for merchants and one of the consumers' most significant friction points.
Many new players in the retail industry aim to offer a frictionless customer experience and set the bar high.
The demands of online shoppers leave no room for a poor payment experience – which has an immediate impact on merchants.
After a bad experience at the checkout, one in three online shoppers won’t return. 73% of consumers identify customer experience as essential to their purchasing decisions.
As the retail environment becomes increasingly competitive, customers know they are in control.
Therefore, merchants must ensure they look after their customers at every stage of the shopping journey – from offering the right products at the right prices to delivering the best customer experience.
They must improve every element of their consumer journey, including the most critical stage: payment checkout.
That's where network tokenization comes into play.
What are the critical challenges of eCommerce?
With more than 2 billion people worldwide buying goods and services in 2021 and eCommerce sales set to grow by 50% over the next four years, online merchants' opportunities for growth are booming.
But to ensure they can take advantage of these opportunities, they need to improve eCommerce payments by addressing two key issues:
- how to increase the conversation rate
- how to reduce fraud
Network tokenization as a means to match card-present conversion rates
The card-present approval rate tops 98% in many countries, while the card-not-present approval rate hovers at about 85%.
Online merchants can do something to bridge the gap between the physical and the digital thanks to automatic card life cycle management and by reducing the false decline rate.
That's why the online payment ecosystem is rapidly moving towards adopting network tokenization through mandatory regulation or strong payment scheme recommendations to benefit merchants and their customers.
The good news?
Merchants adopting network tokenization transform frustrated consumers using a legitimate card into satisfied buyers, remove the dissatisfaction of false decline from the equation, reduce the risk of fraud and increase trust.
Network tokenization is at the heart of a frictionless customer experience.
How to slash fraudulent transactions?
eCommerce fraud currently makes up 79% of all fraudulent card transactions.
As the number of transactions increases, so does fraud.
But existing risk management solutions have not yet met merchants’ expectations. They result either in additional authentication steps – which increase customer friction and cause cart abandonment – or, even worse: declined transactions, which add to consumer frustration.
Because of the increase in eCommerce transactions and fraud, regulations in some countries require merchants to migrate to secure and proven solutions to address this issue.
For example, in India, the Reserve Bank of India notified merchants in September 2021 that they were prohibited from storing card data and had to replace it with alternative solutions such as card-on-file (CoF) tokenization.
While it is not yet a legal requirement in most countries, EMV tokenization is unarguably the solution to slashing fraud.
For example, according to Visa's 2021 annual report, across more than 8,600 issuers and 800,000 merchants, tokens have led to a 2.5% increase in approval rates and a 28% reduction in fraud.
EMV tokenization is a must-have for merchants
Payment networks are introducing financial incentives, regulators deliver migration mandates, and customers are voicing high expectations.
Merchants facing fierce competition want to play an active part online, with platform revenue forecast to grow by 50% in the next four years.
What should online merchants look for when migrating to network tokenization?
There are three key elements:
- Faster time to market and ROI
- Scalability to increase traffic via the leading payment networks
- Scalability to capture value from future innovations
Consumer loyalty and trust are fragile, and any poor experiences immediately come back to bite the merchant. The most successful online merchants are the ones that retain their customers by providing the best payment checkout experience.
Competition online is fierce, and time is vital in implementing a payment solution that enables merchants to retain consumers. Every day counts, and merchants cannot afford to lose customers.
Reducing the time to market will ensure they are a step ahead in the eCommerce revenue battle. There’s also a double benefit: EMV tokenization will increase the conversion rate while lowering the interchange fee, thereby helping to achieve an early ROI.
Merchants are under constant pressure to be efficient and react quickly. Hence, they need to look at solutions that can be integrated into a concise time frame, are ready to use, can be scaled up on demand to support multiple payment channels, and have a robust backend to support future innovations.
The latest payment innovations have EMV tokenization at their heart to ensure that future security solutions, such as enhanced tokenization with device verification, user authentication, and click-to-pay, can be plugged in seamlessly.
How can Thales help payment service providers and merchants to deliver a frictionless customer payment journey?
Over the past two years, in close collaboration with the world’s major payment schemes, Thales has built a brand-agnostic eCommerce platform.
Beyond initial integration, Thales takes care of API maintenance and delivers updates and rolls out new features every year. That capability to adjust and provide new iterations makes innovation a standard, helping Thales customers to stay ahead of the curve.
It allows merchants to achieve a single EMV tokenization integration in only four months, covering the most common international payment schemes: Visa, Mastercard, UnionPay, Amex and Discover, and domestic networks such as Elo.
It saves merchants from having to do all the time-consuming legal work and maintenance updates. With the main networks introducing differentiated pricing, transacting with PAN has become more expensive than using a network token. As a result, improving the time to market for network tokens has become even more crucial.
Choosing the right solution provider is vital, so merchants do not miss out on these new features that will make them stand out from the competition.
But that’s not all! Why stop here?
Network tokenization is only one step in addressing card-present acceptance rates. We can also support merchants in implementing the latest ecosystem updates, such as enhanced tokenization with user authentication, device binding and click-to-pay.
Enhanced tokenization provides a superior user experience and security thanks to three layers of protection:
- Cardholder verification
- Device verification
- User authentication
Combined with authentication and additional risk parameters, enhanced tokenization can further improve conversion rates and cut fraud.
As well as increasing performance, it paves the way for a liability shift, relieving merchants of the responsibility for fraudulent transactions.
Two extensive payment networks – Visa and Mastercard – promote this as a critical improvement to current network tokenization. Security measures are implemented when the card is stored and at the payment stage via user authentication. This ensures the cardholder is the device owner and guarantees the payment by pairing the device with the cardholder.
Thales Enhanced Tokenization smoothes all friction points at the ultimate stage of the consumer journey to deliver the best frictionless payment experience.
Customer payment conversion is converging to card-present, with no compromise on their data security. Merchants can gain the trust of their customers and can further reduce fraud and achieve greater value with increased conversion rates.
Now is the time to offer your customer the best payment experience with Thales
Be up and running in only four months via a single and easy technical integration with 24/7 support plus the ability to accelerate your path to innovation and scale up anytime with Thales eCommerce Gateway.
Get in touch with us if you are interested in learning more about network tokenization, the latest innovations, and how we can help you get started.
Complete the contact form at the bottom of this page, and we’ll get back to you.
Tackling involuntary churn in the subscription economy with EMV tokenizationRead the whitepaper
Webinar: Bring convenience and security to online shoppers with EMV Tokenization!
Listen to Mastercard and Thales explain how EMV Tokenization can enable a frictionless user experience with enhanced security. (June 2021)Replay the webinar
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