Adyen teams up with Microsoft to launch tokenized payments

Tokenized payments lead to higher authorization rates, according to Adyen

Global payments giant Adyen announced Thursday morning the launch of its new Network Token Optimization offering and an expansion of its collaboration with Microsoft.

Adyen claims to be one of the first payment platforms to enable tokenized payments across multiple schemes, and to offer automated optimization of the use of tokens to increase authorization rates.

Microsoft, which it has been working with since 2015, is an early adopter of the new technology.

In a written statement, Matt Rossmeissl – Microsoft’s VP of commerce engineering operations – said when it comes to the payments process, “it’s about making it faster, simple and secure” for customers.

Adyen currently processes payments for Microsoft globally, across all of the company’s product and service lines. Microsoft is a user of multiple Adyen products in addition to Network Token Optimization, including Real-time Account Updater which always charges the most up to date card. 

Overall, Amsterdam-based Adyen provides a modern end-to-end infrastructure connecting directly to Visa, Mastercard, and consumers’ globally preferred payment methods. Its goal is to offer frictionless payments across online, mobile, and in-store channels. Besides Microsoft, Adyen’s general user base includes companies such as Facebook, Netflix, Spotify and Uber.

I talked with Menlo Park, Calif-based Kamran Zaki, Adyen’s COO and former PayPal exec, about the new token optimization offering as well as the broadened agreement with Microsoft.

He pointed out that as the COVID-19 pandemic has pushed more people to purchase things digitally, the propensity for fraud has only increased. As such, approval rates for digital purchases are typically lower than for in-person purchases.

“Issuers  take a harsher look at transactions and decline them if something seems off,” Zaki told FinLedger.

The new Network Token Optimization works by helping higher approval rates for authorization, he said. This in turn generates more revenue for customers such as Microsoft.

Tokens “essentially replace the 16-digit number on consumers’ cards,” Zaki told FinLedger. “We take the work away from customers like Microsoft by making it super easy to roll out to their end customers. We take on the work, with no new integration required from them, and no development effort on their side.”

Just what is tokenization? Adyen describes it as the process of replacing sensitive data with non-sensitive data. In payments in particular, it is used to safeguard a card’s primary account number (PAN) by replacing it with a unique string of numbers, attributed to that card only. There are also ‘Network Tokens’ which are also non-sensitive references to a PAN but they are created by the major card networks like Mastercard, Visa and American Express. In both instances, the unique number created becomes known as the ‘payment token’.

Payment tokens are automatically issued in real-time and used online in predefined payment environments, for example with a specific merchant. With tokenized payments, the PAN is not transmitted during the transaction, making the payment more secure. Since the PAN is never compromised, there is little possibility that the token can be used for fraudulent activity – even if a data breach occurs and payment tokens are accessed, according to Adyen.

Tokens are securely stored, and can be used to enable “one-click” payments for future transactions. 

They work for both in-person and digital transactions.

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