How tokens provide automatic credit card updates & reduce churn

Credit card renewals and updates usually cause problems both for customers and merchants, since they can cause missed payments, late fees and even contract cancellations. The token solution is not only simple to use and increases overall data security. 

Pain point: Credit card updates

35% of cardholders regularly forget to update their card credentials for at least one merchant (Engine Group via Visa). These merchants, on the other hand, will on average reach out two to three times to their customers to ask them for a card update and prevent an (involuntary) cancellation. 

This causes more work (and stress) on both sides and results in service gaps, cancellation and can even damage your brand. 

According to the Engine Group report, 47% of surveyed consumers across the globe had a negative experience due to a failed card update. 

Consider that recurring payments and one-click payments are specifically set up to reduce the time and effort of a recurring purchase. The customer has already decided on the product, they’re loyal to your company and they have no reason to consider an alternative. 

However, the moment a supposed automatic paying process is declined due to credit card updates, the customer suddenly has to take action and “fix” the issue. As such, they might be more prone to evaluate the product and pricing. 

Furthermore, even if the card update is not your fault, the negative experience of an interrupted service, failed payment, and additional steps to verify the new information is closely associated with your brand. The customer experience has taken a hit. 

So, what’s the solution? 

Tokenization solves the problem by replacing the usual (stored) highly sensitive card information with a specific, individual identifier that acts as a surrogate for the sensitive information (“token”). 

How does it work? 

Traditional credit card payment processes

Usually, the card details are filled in during the payment steps for payment options such as “one-click-purchase” or subscription (aka recurring) payments. These details are processed by the payment solution which sends them to acquirer* who then forwards them to the card network** and the customer’s bank for verification. The details are then stored by the payment solution. 

If the details change, however, they need to be updated manually by the customer. 

It should be noted that single payments do not work with tokens since they only occur – as the name implies – once – and the card details don’t need to be saved for future use. 

Tokenization

With tokenization, the payment solution does not forward the info to the acquirer but rather directly to the card network which then hands out a token that can be stored instead of the card details. The payment solution sends the token back to the acquirer who can use it for regular payments. 

The token is unique and contains a long string of numbers and symbols that basically act like a secret code between the acquirer and the payment solution. This code does not contain any sensitive and/or private information but instead is like a secret handshake that opens the door to receive necessary information in case of a card update or replacement.  

The foremost purpose of these tokens is not ease of use (which is a great side-effect) but rather security since the credit card info is not even stored in the merchant’s database and the token itself does not contain any sensitive card information. 

The great benefit is therefore that any card updates are automatically processed via the card network so that the token still works even if card details are updated. 

Use Case: A smooth journey for Danish motorists

For an innovative use of credit card tokens, take a look at the Visa use case from their customer Great Belt Bridge. 

This 18km bridge connects the east to the west of Denmark and is used by thousands of motorists each day. The toll is generally paid via direct debit subscription which is managed by the toll system operator Brobizz. These subscriptions help motorists to simply drive through without having to stop and pay manually. 

To further improve this process, Brobizz – with the support of Billwerk+ – added tokenization for Visa, so no motorist has to stop and pay the bill manually just because their card details needed to be updated. 

This seemingly small change increased approval rates by 5% and decreased the amount of service calls which lowered operating costs and increased revenue. 

Read more about the use case here. 

Summary: The advantages of tokenization 

For your customers

• No manual updates required 
• No late fees or service cancellations
• Higher level of data protection, since card details are not shared with the merchant

For your business

• No “accidental” service cancelations which increases your overall revenue
• Higher customer retention (customers are less likely to reconsider cancellation if they are not reminded of any card updates) 
• Decreased security risks (e.g., data breach) 
• Less effort to convince customers of updating their credit card details (and therefore less friction between your brand and your customers)

Billwerk+ partnered with Visa to create a Visa Token Service for their subscription management solution that improves recurring payment processes, gets rid of lost revenue and frustrating credit card processes for both your customers and your finance and service teams.