Use of tokenized debit transactions is rising rapidly as consumers choose debit for mobile wallet transactions, e-commerce purchases, and recurring “card-on-file” (COF) payments. Transactions previously processed using card-brand tokens were supported only by card-brand networks or lacked security authentication when routed to unaffiliated networks.
Since the Regulation II clarification took effect July 1, 2023, card-brand card-on-file tokens can now be routed to unaffiliated debit networks. These transactions may, however, still lack security authentication unless the merchant routes the transaction to the card-brand’s network. Due to the lack of security authentication, tokenized transactions routed to unaffiliated networks using card-brand tokens may experience lower authorization rates, higher fraud and higher chargebacks.
In anticipation of this limitation, PULSE developed a Side-by-Side Token Service, which is now available to merchant acquirers and other unaffiliated debit networks. The service enables both routing choice and security authentication on tokenized card-on-file debit transactions for the first time.
“Merchants and issuers no longer need to choose between security and routing choice for tokenized card-on-file transactions.”
Jennifer Schroeder, PULSE Executive Vice President, Product Management
"Merchants and issuers no longer need to choose between security and routing choice for tokenized card-on-file transactions," said Jennifer Schroeder, PULSE Executive Vice President of Product Management. "With this service, all the benefits associated with tokenized debit transactions are possible no matter which network the merchant chooses."
Empowering choice and competition
PULSE has advocated for choice and competition in payments for many years. This long-standing principle was behind PULSE’s transformation from a PIN debit network to one that competes for all forms of debit, including PINless, signature, e-commerce, and funds-transfer transactions. It is also why the network is electing to make the Side-by-Side Token Service available to competing unaffiliated networks.
The patented Side-by-Side Token Service enables tokenized routing choice for eligible COF transactions, including cryptogram validation, with no impact to the cardholder experience. The service uses industry-standard provisioning and lifecycle-management practices, reducing potential friction and enabling easy implementation.
In addition to providing the potential for increased authorization rates, reduced fraud risk, and lower chargebacks associated with tokenization, the service allows transactions to route to participating unaffiliated debit networks. Prior to the Side-by-Side Token Service, the benefits inherent to tokenized transactions were not available when routed to unaffiliated debit networks.
The Side-by-Side Token Service also can help issuers comply with the Federal Reserve Board’s recent Regulation II clarification, which states that card-not-present transactions are included in the requirement that debit issuers must enable cards to support at least two unaffiliated networks.
The path forward
PULSE is enrolling its issuers in phases over the next year and is seeking to enroll merchant acquirers and additional debit networks. Merchants interested in the Side-by-Side Token Service should contact their acquirer about availability.
To learn more about accepting Side-by-Side Token transactions, acquirers can contact our Merchant Acquirer Sales team. Issuers who would like to learn more can connect with their Account Executive or a PULSE debit expert.