Tokenization: the invisible ‘rail’ powering the future of payments

What Is card tokenization?

Tokenization replaces a cardholder's "primary account number," or PAN, with a string of randomly generated digits. The token is time-limited and specific to the context of the payment - device, merchant, channel or transaction type. It is useless to a fraudster.

Tokenization brings safety and convenience to 'card not present' mobile and desktop transactions. But it has impacted in-store payments too. Here, the payment terminal reads the card information, but instead of sending details to the payment processor, it sends a request to a tokenization service. The latter generates a unique token representing the card and transaction data.

Tokenization is much safer than other security methods such as encryption, where hackers can access the real data if they get hold of the decryption key or unscramble it with brute force.

The tech is also great for business insight. Tokenization preserves the structure of the original PAN, so it can be used for analytics without exposing sensitive data.

Digital wallets: where tokenization first took flight

Tokenization emerged first in digital wallets like Apple Pay, Google Wallet and Samsung Wallet. These products house 'virtual' cards with no holograms or signature strips, so they demand a new user experience.

Cardholders enroll a card once, authenticate it with biometrics, and enjoy secure, tap-and-go payments powered entirely by device-bound tokens. This model delivers three breakthroughs:

1. Better security. Real card numbers never touch the merchant environment.
2. Higher approval rates. Tokens offer richer data and stronger trust signals to issuers.
3. Unchanged consumer behaviour. Shoppers tap, scan or click exactly as before.
   

From card numbers to tokens: a silent revolution

As digital wallets grew in popularity, the card schemes introduced the tokenization standard. In 2014, Mastercard launched its Mastercard Digital Enablement Service to generate and manage millions of tokens.

Today, the tech is fast becoming the default for card payments.

• Juniper Research forecasts that the number of tokenized card transactions will rise from 283 billion in 2025 to 574 billion in 2029.
• In 2024, Visa confirmed 29 percent of its transactions are tokenized. It has issued more than 10 billion tokens, generating $40 billion in incremental e-commerce revenue.
• Mastercard has announced that by 2030, manual card entry and passwords will begin to disappear, replaced by tokenization and biometric authentication.

How tokenization powers convenience with no compromise on security: Click to Pay and biometric payment passkeys

Tokenization undoubtedly protects transactions from hackers. But it doesn't change the user experience. Something more is needed to replace manual card number entry and enable Click to Pay. This is where biometric payment passkeys come in.

Payment passkeys let users confirm their cardholder status with a fingerprint or face scan. That means no passwords, and no reusable secrets. The biometric is linked to the specific device too, so even if a hacker reproduces it, they cannot use it on their handset.

Payment passkeys, when paired with tokens, create a highly secure and intuitive payment method. The giant card schemes, such as Visa, have launched their own passkey services. And the FIDO Alliance (which launched the passkey standard) says 48 percent of the world's top 100 websites have integrated passkey support.

The next frontier: autonomous commerce

The payments space has spent a decade adjusting to online shopping. Now it is preparing for another revolution: agentic commerce.

This is a world in which human shoppers instruct AI-powered agents to make purchases for them. These agents can make intelligent choices about how and when to buy. The tech is already here. OpenAI launched Instant Checkout in ChatGPT in 2025.

Agentic commerce changes the fundamentals of digital transactions: there's no human to perform a face scan or click a 'buy' button.

Tokenization is part of the solution. Services like Mastercard Agent Pay use tokens to ensure every agent action obeys pre-defined permissions and limits. Cardholders can understand where, when and why an agent made a purchase.

Supporting the industry shift

The rise of tokenization is putting pressure on issuers to modernise infrastructure without adding complexity. Technology partners such as Thales are helping them to manage the transition. Issuers can use Thales' digital token management services to deploy, provision and control large fleets of digital cards across all channels. These tools allow financial institutions to offer consistent, secure and authenticated payment experiences while easing the operational burden of rapid token growth.

A future built on tokens

The foundations of card payment are shifting. Networks are moving to numberless cards, passwordless authentication and universal checkout experiences. Wallets are relying on device and merchant-bound credentials. Agentic commerce is demanding processes that protect user intention while hiding sensitive data.

Tokenization is the key to all of these advances. What was once an invisible security measure is becoming the backbone of the next generation of digital payments.