Technology has diversified the payment space immensely, creating an environment with all types of payment scenarios for businesses to navigate. Payment vaults, in particular, have evolved to incorporate many new advanced features that offer unique operational and cost benefits.
Spreedly’s Daniel Scagnelli recently sat down with Arkadiusz Gac (Staff Engineer at Brainly) and Annabelle Frank (Chief Commercial Officer at Loyalzoo) to discuss how forward-thinking vaulting strategies can lead to success with both payments and business growth (view their conversation here).
Reflecting on this recent e-learning session, we can draw four key insights into how to establish an effective vaulting strategy:
1. Tokenization improves subscription-based customer experiences
Brainly is an online collaborative learning community for students dedicated to peer-to-peer learning.
While Brainly’s base offering is free for all users, the company also offers a paid subscription. Brainly’s primary business model centers around a subscription-based offering, necessitating a secure and reliable means for retaining subscription customers’ payment methods.
A major component of Brainly’s vault strategy is tokenization, a process that converts sensitive payment details into a unique token that only holds value in a specific financial context.
Tokenization enables recurring transactions to occur automatically. Customers can enjoy a hassle-free recurring payment experience that does not require ongoing manual approvals, and Brainly can keep customer information safe without tremendous technical or regulatory burden.
Additionally, Brainly and other merchants can leverage tokenization with a third-party vote, ensuring no specific payment service provider (PSP) is involved in the process and allowing greater flexibility when selecting and switching between different PSPs. In turn, merchants can establish a more dynamic payment system that can alternate between providers based on the circumstances of each transaction.
Such flexibility can be particularly advantageous in instances of soft declines, as merchants can more easily and efficiently retry payments with other PSPs. The main result and benefit of this is an uninterrupted subscription experience for customers.
2. Advanced vaulting supports merchants in brick-and-mortar environments
Loyalzoo provides a customer loyalty solution for SMBs, with a focus on brick-and-mortar businesses.
While Brainly is itself a merchant, Loyalzoo serves merchants as customers. The challenge in this scenario becomes not how Loyalzoo can streamline payments but, instead, how to provide its merchant customers with the capabilities to simplify payments and reconciliation.
SMBs, especially those operating from physical storefronts, often lack the technical know-how to implement a payment vault. Unlike e-commerce environments, a brick-and-mortar store requires merchants to understand how to troubleshoot declines in real-time.
Loyalzoo leverages advanced vaulting to address these hurdles. With a fully managed advanced vaulting solution, neither Loyalzoo nor its merchant customers bear the technical responsibility of maintaining evergreen payment information or securing vaulted information through tokenization. All of these processes occur behind the scenes, allowing Loyalzoo to minimize time spent on declines.
As payments become more diverse, even brick-and-mortar businesses are utilizing different payment processors to accommodate distinct payment methods. The use of more payment processors and PSPs leads to increased accounting and reconciliation work.
With the help of an advanced vaulting solution like Spreedly, however, Loyalzoo can reduce this additional work for itself and its clients with the ability to use just one card entry form connected to multiple different payment gateways.
3. Increasing payment volume requires network tokenization
As your business grows, you need confidence in your payment system’s ability to scale with you. In Loyalzoo’s case, the company’s growth over the last few years has been substantial, reaching more than 70,000 payments at a rough total value of $8 million each month.
Network tokenization, a specific type of tokenization, enables you to receive tokens issued directly by the card networks themselves. Unlike standard vault tokens, network tokenization facilitates transactions across the entire payment ecosystem with interoperable tokens.
With network tokenization, Loyalzoo can significantly simplify both recurring and one-time payments by facilitating card-on-file payments. Network tokens are kept updated by the card networks themselves, meaning neither Loyalzoo nor its customers must manually change this information should a customer’s payment details change (i.e. if a customer’s card expires).
“— we’ve gone from having a normal card payment where you take out your credit card and tap it or insert it, swipe it to really getting to a point where you just walk up to the till as an end consumer and just basically charge the card on file. You don’t have to take anything out of your wallet, you don’t have to tap your phone, you don’t have to think twice.”
— Annabelle Frank (Chief Commercial Officer at Loyalzoo)
4. A dual-strategy approach to payments drives growth
Looking specifically at the Spreedly platform, businesses like Loyalzoo and Brainly can greatly benefit from combining advanced vaulting with the capabilities of older solutions like Account Updater.
When you compare the performance of Account Updater to the newer Advanced Vault, both show tremendous advantages in specific payment scenarios. These solutions are often bundled together in what Spreedly calls the belt-and-suspenders approach, which ensures your payment system has multiple checks and balances in place to maximize authorization rates.
Through a combination of these solutions, your business can take advantage of early network tokenization adoption without missing out on revenue from more traditional tokenization methods. This dual strategy often proves critical for bringing your business to market quickly and successfully without worrying about payment scalability.
Spreedly Unlocks Global Payment Performance for Merchants and Platforms
Spreedly’s open payments platform is designed to provide merchants and platforms with a single and secure integration. Once implemented, Spreedly enables you to deploy everything from network tokenization to advanced vaulting, as well as intelligent payment routing.
Speak with Spreedly today to modernize your payments and unlock sustainable global growth.
Download the Vaulting eBook Below
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