How recurring payments and subscriptions improve with network tokens

Card-based recurring payments/subscriptions have become a widely used payment method for many businesses and consumers. Many global internet services like Netflix, Spotify, and Dropbox operate with this payment method. Additionally, many physical services, such as gyms, libraries, public transportation companies, base their businesses on subscription and recurring payments. This gives merchants the benefits of consistent cash flow, and the consumers the ability to store their card once at the merchant but then forget it and just enjoy the provided services and goods. Predictability, consistency, and simpleness are very likely reasons why this type of payment has grown (and is still growing) so rapidly in popularity.

This post will highlight two essential aspects of recurring payments and subscriptions that can be improved by replacing cards on file with network tokens from Mastercard (MDES) and Visa (VTS). Let’s begin looking at the pain points first:

#1 Interrupted payments due to expired cards

Expired cards are merchants’ worst enemy when operating with recurring payments and subscriptions. An expired card means that the merchant will need to bother their customer to update the card before continuing with the payments. In the best case, this will only cause a delay, and in the worst case, lead to a customer quitting their account or subscription with the merchant. The merchant is in this situation at an unnecessary risk of losing a needed income.

#2 False declines

The second possibility of losing a payment is through a ‘false decline’ made by the card issuer due to fraud suspicion. This decline may occur even if it is a legit transaction that is being carried out. Such false declines are common in eCommerce due to the insecure nature of online transactions where the card is not physically present. Card issuers’ fraud monitoring systems are tuned to handle such transactions more strict than for card + PIN presented in a physical store. For a legit eCommerce merchant, this means lost revenue.

What are network tokens?

Network tokens are virtual payment cards created by the payment schemes, and they replace the original card in the digital space. This allows for several network tokens to be created per card, and they function in the same way as the original card when storing and transacting with them. However, their digital nature allows them to possess several properties and functions that significantly makes life better and more robust for merchants in the eCommerce space. 

“Network tokens are virtual payment cards created by the payment schemes, and they replace the original card in the digital space.”

A network token will never expire the same way as a payment card. A merchant who replaces cards for network tokens will enjoy the benefit of having tokens that will always be kept valid by the payment scheme and card issuer. But what if the card issuer issues a completely new card to the cardholder? Well, that is the beauty of it! The cardholder will receive its new card in the mail but does not need to do anything with any of his subscription services at merchants that utilize network tokens behind the scenes. Active tokens are kept up to date automatically as long as the cardholder’s bank account is active. Cardholders will in this way avoid the hassle of updating services with the new card, and the merchant will not need to delay payments, bother their customers or in the worst case lose them.

“Active tokens are kept up to date automatically as long as the cardholder’s bank account is active”

What about false declines to transaction requests because of fraud suspicion? How are network tokens supposed to help here? Well, EMVco and the schemes developed network tokenization to (among other things) heavily strengthen the security of eCommerce payments to accommodate modern fraudulent attacks. To keep it brief, let’s mention two main reasons why network tokens battle false declines better than cards. Firstly, the card issuer has greater visibility around network tokens since they participate in creating this token for the merchant. A network token used in a transaction provides card issuers’ fraud monitoring systems with more reliable and known information to validate before approving or declining. Secondly, a tokenized transaction has a higher assurance level than a card transaction due to several imposed security mechanisms, e.g., domain control and cryptography. It means, in other words, that only the merchant requesting the token can use it, and it is always secured cryptographically.

“…network tokens battle false declines better than cards.”

All this sounds great, right? But who should consider enabling network tokenization? And how is the availability in my markets? If you store cards today and use them for recurring payments or occasional shopping, then this is relevant for you. We would be happy to have a chat if you would like to know more about how this works and on the availability in your markets. Please reach out to