What is a Card-on-File Transaction and what is it used for?
Blog post from Basis Theory
Card-on-file transactions allow merchants to securely store a customer’s payment card details, often through encrypted systems or tokens managed by payment service providers, so future payments or refunds can be completed without re-entering information. They include consumer-initiated transactions, where a customer provides payment details and authorization, and merchant-initiated transactions, which use prior customer consent for recurring, installment, delayed, no-show, reauthorization, or retry payments. Common applications include subscriptions, memberships, repeat orders, installment plans, reservation fees, and add-on purchases, offering faster checkout, improved conversion, more predictable revenue, and reduced administrative effort. However, businesses must account for PCI DSS compliance requirements, card-network processing fees, failed payments caused by expired or replaced cards, and limits imposed by payment-provider-specific tokens. Independent tokenization providers can help businesses retain secure card data control and route payments across multiple providers while reducing the need to operate their own PCI-compliant cardholder data environment.
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