If you want to improve the experience of your consumers, while simplifying the payments, you must know this concept.
You may not know the meaning of «Tokenizing» or, if you do, you may not be clear about what benefits it can have for your business, or whether it can be applied in your industry. That’s why we want to collect in this article the benefits of tokenization in payments and its various applications, which ultimately boil down to a better customer experience and increased sales for the business. This technology can be applied to both online and offline commerce and for multiple business models.
We’ll start by explaining how tokenization works. When people pays in a store, either physically or online with a card, there is the possibility of storing the data of that card so that they do not have to enter them in subsequent purchases or payments. To do this, a unique token must be created in association with that card, as the actual data should not be saved to avoid fraud or other dangers. The tokens created will be stored in a secure vault and may be used for future collections (always with the user’s prior authorization).
Once we know how it works, we can go on to analyse some of its applications in different sectors of activity:
The tourism sector is one of the main beneficiaries of this technology, especially in the case of hotels and car rental companies. For the first ones, its use will be as essential in the online environment as it is offline. First of all, when the user makes a reservation in a hotel, it is very useful to tokenize his card so that he does not have to enter it again in future reservations that he wants to make in the same establishment or hotel chain. On the other hand, in the face to face area, it is possible to tokenize the card in the PinPad (payment terminal) during the Check-In, even avoiding the visitor to have to go to the reception to pay and facilitating the collection of the different services enjoyed during the stay.
For car rental companies, the tokenization will allow the customer to store the card in-store at the time of pick-up of the car, in order to be able to make possible charges to fill up the gas tank, pay fines or repair any damage to the vehicle. It will also be used for online reservations, during which the card can be requested to carry out this tokenization and thus ensure subsequent payment.
On the other hand, a clear example of its utility is the subscriptions for any type of company. Pet shops with monthly plans for the vet, audiovisual companies that require a monthly payment for access to their content, credit companies that must collect their return fees, insurance companies, etc. The examples are almost infinite, but in all of them the possibility of tokenizing the consumer’s card plays a fundamental role. It would be extremely tedious to have to ask the user to enter their payment details again and again, also increasing the possibility that payments will be delayed, not made or that subscribers decide to cancel the service.
Therefore, tokenization is key to help companies with this business model to maintain their profits and avoid problems and costs in a very simple way. In this sense, it should be noted that any ecommerce can improve the experience of its users, saving the card at the first purchase and thus making the checkout process much easier on subsequent occasions. This simplification of the process will help to increase conversion and build consumer loyalty more easily.
From Sipay, a Spanish payment gateway with more than 25 years in the sector, they comment that «tokenization is a basic point in the collection process for many of our clients, through which they can guarantee the best experience to the final consumer, thus achieving the best results«.