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CMSPI – IAC State of the Industry Report
CMSPI – IAC State of the Industry Report
3. Fees Card networks are beginning to develop different cost frameworks for tokenized and non-tokenized transactions. We have observed facets of this in the U.S., Australia, and Europe in relation to public interchange pricing on both global and domestic networks, as well as for network fees. Furthermore, merchant acquirers have adopted various cost models for supporting network tokens, with some charging a per transaction fee for token management services and others charging a share of the interchange incentive value derived from sending tokenized transactions. With these direct cost implications, it is critical that merchants have enough transaction information to continue to make informed decisions about how they want to optimize with or without the usage of network tokens. 4. Customer Response Management For tokenized transactions, ensuring visibility of the PAN associated with a customer purchase is one way for a merchant to ensure they have adequate information to exercise choice over which payment service provider or network to send a transaction, but it can also be critical for managing customer refunds and returns. For example, if a customer uses a credit card within a digital wallet to make a purchase in-store, but then returns the item and presents the merchant with the physical credit card to process the return to the original payment method, the payment methods may not look to be linked since the digital wallet transaction replaced the card PAN with a device PAN. From a merchant perspective, being able to match the original payment method and the one used to process a return often makes the return or refund both simpler and less risky to process. While some solutions, such as the EMVCo-generated concept of a Payments Account Reference (PAR) 120 , can help map the customer across various purchasing environments – including the digital wallet example above – there is limited third- party information about the global adoption of PAR across all stakeholders, and it remains to be seen whether PAR can solve concerns over portability and data inputs into fraud decisioning tools, so it may not be an adequate standalone tool to minimize customer experience friction.
5. Operational Excellence: Authorization Rates & Risk Decisioning In addition to customer response management, the PAN is an important tool used across several merchant paying environments and business units to reconcile when transactions are authorized and then settled into the merchant’s account. Furthermore, PAN data is one way to identify the customer across different paying environments, which can help make internal fraud decisioning tools smarter, and can improve the flexibility and portability of token management solutions between various payment service providers. Another area of potential customer friction – especially in an online environment – is when legitimate customers have an attempted purchase declined. There are some industry claims that tokenized transactions have higher approval rates and less fraud effectively meaning more of these legitimate, good sales are making it through the checkout compared to being declined for reasons like suspected fraud. Although, there are limited third-party sources available to validate these claims. Overall, there are still some customer experience and data access issues that may need to be resolved to give payment token adopters more confidence in the system. The Australian regulatory interventions outlined in Section 5 could potentially be a step in the right direction. CONCLUSION Merchant card fees are climbing as CNP becomes a larger percentage of total commerce in many global jurisdictions. In addition to higher like-for-like fees, there are several complexities associated with CNP transactions that may result in cost increases (for example, transaction integrity fees), further exacerbating sticker shock for omnichannel merchants in particular who are experiencing volume shifts. There is little cost relief for online merchants; unlike in-store channels, the low-cost cash alternative (see Section 1) doesn’t exist online.
120 EMV® Payment Tokenization | EMVCo
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