Restaurant operators have a large selection of technologies to choose from today to help gain valuable customer insights that can further drive business. One option is tokenization, which may be viable in place of, or supplemental to a more traditional loyalty program.
At its simplest level, tokenization is the process of changing a credit card primary account number, or PAN, into a serialized “token” number that can be used for financial transactions in place of the PAN. Payment Tokens are surrogates for the real PAN data that allow for the secure execution of the transaction, yet if stolen or otherwise exposed, become basically useless to a thief or third party.
Some tokens can be used as proxies for the individual PAN, allowing operators or banks to track the behavior of the cardholder/PAN that the token identifies. Additionally, there are several different types of tokens that are virtually useless for tracking (such as single use transactional tokens) complicating matters further.
When trying to use tokens for marketing or guest intelligence purposes, it is important to understand the source of the tokens you are attempting to track. A transactional token is useless for tracking as it is obsolete and effectively discarded after use, other than for refund or chargeback uses.
Durable Tokens can be more useful. At the simplest level, a durable token is generated against the Cardholder PAN, acting as a surrogate or proxy serial number for the PAN. These durable tokens live on after the transaction so they can be monitored over time for the tracking of usage. However, it is important to understand that these tokens do not cross payment ecosystem boundaries. A PAN that is in your Apple Wallet will have a different token than the PAN that is in your Samsung Pay wallet.
Tokens are assigned to the PAN by a Token Service Provider. Different operators and their banking relationships use different Token Service Providers and will generate different tokens for the same PAN, but the tokens may stay the same within the PAN to Wallet to Operator/Bank payment path. The Operator to Bank link is where the token generation, linkage, storage, control and database live.
The simplest representation of the payment food chain is:
- PAN—The Cardholder’s card number
- Wallet—Where the card lives; Physical card, one of several Mobile Wallets
- Bank—What Payment Network/Bank the Operator uses
Any difference in any of those four entities and the token will be different for the same PAN. This is further complicated if the cardholder updates their card number or if a card gets reissued. Conversely, if the four elements of the ecosystem are consistent the token may remain available for potential marketing usage by elements in the ecosystem that have visibility to it. Some operators are relying on the payment food chain to remain consistent in order to use tokenization to track payment behaviors of their customers. Assuming the food chain above is not broken, this can be possible.
As a practical matter, there are a lot of assumptions in play to maintain the usefulness of tokenization for guest intelligence over time. Operators must remain with the same payment processor to maintain a consistent Token Service Provider. At the same time, operators must hope that their customer does not use multiple credit/debit cards from visit to visit, change their primary card usage preference, change phone payment ecosystems when they switch phones or switch between physical and mobile payment, all the while hoping that a major operator breach does not occur to force a mass reissuance of cards. Any of the above actions will render token tracking, outside of immediate-term, useless for marketing and guest intelligence.
This dilemma is best solved in the first instance by leveraging loyalty programs to provide the operator-to-customer linkage that payment tokenization aspires to provide. Over time the loyalty relationship can be migrated away from the discount coupon club many programs resemble today, to the primary linkage used to identify a customer to enable personalization of the customer experience.