01Mar, 2020


What is scheme tokenisation and how will it improve cash flow in the future?

Consumer expectations when it comes to payments are rapidly changing.

The use of tokenisation has enabled the growth of secure online purchases, increased the use of recurring transactions, allowed internet-connected devices to be commerce-enabled and allowed context based payments to be introduced by digital disruptors like Uber.

These automatic credit card payments provide important benefits for both consumers and merchants.

For consumers, they can help streamline finances and ensure bills are paid on-time. Late payment fees are avoided as are other penalties for late payment which could impact a customers credit rating.

For merchants, they enjoy the benefit of more predictable cash flow, reduced collection costs and less administration when the credit card details are kept on file and up-to-date.


Credit card authorisation can fail for many reasons. These include an expired credit card, incorrect CCV number or if the credit card is registered as lost or stolen.  When credit card authorisations fail  it presents a significant issue for both merchants and consumers.

Failed payments adversely affect merchants cash flow and customer experience,  and increase collection costs.

For consumers, they risk service termination if payment information is not updated.  A failed payment can cause hardship for consumers, particularly for automatic payments that are required to be paid in advance for the service to continue, such as insurance policies amongst others.

What is tokenisation and scheme tokenisation, and how do they work together?

Tokenisation is the data security methodology that allows both consumers and merchants to securely store credit card information against consumer accounts, including automated payment schedules.

As part of IPSI’s EnterpriseSecure payments platform, IPSI stores tokenised consumer credit card data in a secure cloud storage vault for our Enterprise clients to ensure they maintain PCI DSS compliance.  When a transaction occurs, the tokenised credit card data is sent to IPSI, which then processes the transaction and forwards payment to the banking network in real-time.

Before scheme tokenisation, if a credit card had expired or was updated (due to being lost or stolen), each location that had stored credit card information had to be updated with that new credit card information by the customers/cardholder.

Unfortunately, many consumers aren’t aware of what, automated payments they have in place. If the credit card data stored by a merchant has expired or is out of date and has not been updated and payment is processed against that customer account the payment will be declined.

In the future, Scheme tokenisation will remove the burden of updating the credit card information away from the consumer and the merchant by securely updating the tokenised credit card information on file at IPSI via automated scheme card updates;  to ensure automated payments continue without fail.

This process is highlighted in the chart below:


What are the benefits for merchants and their customers?

Cash flow is essential and being paid on time is critical. Scheme tokenisation ensures our customers will receive the benefits of successfully approved payments, improved success rates and better customer service without the issues associated with declined customer payments, manually follow up with customers and the direct/indirect costs associated with updating card data is avoided.

Increased payment authorisation rates

Improved authorisation rates increase cash flow and improve customer services while reducing collection costs.

More predictable cash flow

Merchants are more able to make financial decisions when cash flow is more predictable.  Scheme tokenisation reduces the instances of failed payments ensuring businesses know what money is coming into their account.

Reduce collection costs and administration

Having to chase down failed payments is a significant administrative burden and cost.  While some payment reminders and notifications can be automated, payments that fail for a second time often need to be followed up by call centre staff or through direct mail. Payments that are outstanding for an extended period require debt collection, which comes at a significant expense.

Reduce fraud exposure and financial risk

Scheme tokenisation reduces fraud exposure and risk as it reduces credit card data exposure within the payment process.

What are the benefits to consumers?

Consumers expect seamless payment experiences, especially as they develop an increased reliance on automated payments to manage many of their purchases.

More convenient

If you’ve ever had to update your credit card payment details due to a lost or expired credit card, you’ll know that it’s an inconvenient, time-consuming exercise. The convenience of having credit card details updated automatically is a massive win for consumers.

Eliminate late payment fees

Many merchants penalise consumers for late payments. Consumers with expired credit card details on file run the risk of being charged late payment fees.

Prevent service cancellation

Service cancellation is a significant risk for consumers with automated payments. Insurance policies that don’t get paid can leave consumers without cover. Services such as mobile phones and the internet can be terminated quickly due to outstanding payments, putting consumers at risk.

Keeping up with consumer expectations

The phrase “isn’t it nice when things just work” is one that has become increasingly relevant to payments.  Consumers expect a seamless, friction-free payment experience and expect technology to be the key driver.

Scheme tokenisation service is an important security tool that will help larger enterprises to deliver a payment experience consumers expect while maintaining their data security obligations.

If your organisation would like to know more about IPSI’s tokenisation capability or you would like to  discuss scheme tokenisation and other emerging 2020/21 technologies please contact our team on 1300 975 630 or email [email protected]

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