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How Network Tokenization Helps Improve Payment Authorization Rates
Tokenization
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May 21, 2025
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6 min read
Managing online payments often means dealing with the challenge of declined transactions. These declines can be caused by a range of factors — from expired cards and outdated credentials to fraud suspicion or incorrect card details. While some declines are necessary for protecting against fraud, a significant number of legitimate transactions are rejected unnecessarily.
This is where network tokenization comes into play. As adoption increases across the payments industry, it is proving to be a valuable lever in improving authorization rates, especially for digital commerce businesses operating with recurring payments or stored card credentials.
This guide explores how network tokenization works, why it is gaining traction with issuers, and how it can help merchants reduce payment failures and improve overall revenue performance.
Most card transactions today are based on the PAN (Primary Account Number) — the static 16-digit number printed on every credit or debit card. This approach comes with several limitations that are increasingly at odds with the needs of modern digital commerce.
One of the key issues with PANs is that they do not change unless the card is lost, stolen, or reissued. This static nature makes PANs vulnerable to fraud, particularly in a digital-first environment. According to the 2024 Payment Fraud Intelligence Report by Recorded Future, over 269 million stolen card records were identified across both the dark web and open web platforms in a single year.
Additionally, PANs create friction in situations where cards expire or are replaced. Unless the cardholder proactively updates their information, any stored payment credentials become invalid, leading to a failed transaction. This is especially problematic for merchants that rely on recurring billing models, subscription services, or digital wallets, where a seamless payment experience is essential.
These systemic challenges make it increasingly difficult to maintain high authorization rates when relying solely on PAN-based transactions.
Network tokens are an alternative to PANs and offer a more secure and flexible way to process card-not-present transactions. Instead of transmitting the actual card number during a transaction, the payment is completed using a token — a dynamic, network-issued credential that represents the underlying PAN but cannot be used outside the context in which it was created.
Tokenization providers such as PCI Proxy work with card networks like Visa, Mastercard, and American Express to create and manage network tokens on behalf of merchants and service providers. These tokens are merchant-specific, encrypted, and tied to contextual data, such as device information or transaction channel, which helps build trust during authorization.
Crucially, these tokens are not static. Even if the customer’s actual card changes, the token remains valid and functional. This significantly reduces declines caused by outdated card data and contributes to a smoother payment experience for both customers and merchants.
One of the most impactful features of network tokenization is the inclusion of network token assurance data. This is a set of metadata that accompanies the tokenized transaction and provides the card issuer with additional context to assess the legitimacy of the payment.
For starters, it includes device binding information — for example, whether the transaction is coming from a trusted device. This is important because issuers are more likely to approve payments made from known devices than from new or untrusted ones.
The data also includes transaction context, like the type of purchase and the merchant involved. For example, recurring subscription payments might be considered less risky than one-time purchases.
Finally, there’s cryptographic validation that helps confirm the integrity of the transaction.
Together, these data points provide issuers with a richer and more detailed picture of the transaction. Rather than making an approval decision based solely on the PAN, issuers can use the assurance data to make more informed and confident choices. As a result, tokenized payments often move through a more trusted approval path, leading to a measurable reduction in false declines.
Alongside assurance data, another fundamental benefit of network tokenization is the ability to update credentials in the background — automatically and without user intervention.
When a PAN-based transaction is attempted using an expired or reissued card, the payment typically fails unless the cardholder has manually updated their payment method. This results in lost revenue and disrupted customer experiences, particularly for businesses with recurring billing models.
Network tokens solve this issue by staying current even when the underlying card changes. If a customer receives a new card from their issuer, the associated network token can be updated in real time by the networks themselves. This eliminates the need for manual updates and dramatically reduces declines caused by outdated card credentials.
The value of network tokenization is not only theoretical — it is supported by recent data from the networks themselves.
According to Mastercard, merchants using network tokens experience an average 2.1% increase in authorization rates compared to those sending PANs. Visa reports an even higher figure, with a 4.6% uplift in approval rates. While results may vary by region, vertical, or issuer, these improvements are significant at scale.
To put this in perspective: for a merchant processing €10 million in card volume per month, a 3% increase in approvals translates to €300,000 in recovered revenue each month. Over a year, that equates to over €3.5 million in otherwise lost transactions.
As we just heard, two key factors drive this uplift:
These factors work together to create a payment flow that is both more secure and more reliable — benefiting all parties involved.
One of the reasons network tokenization is seeing growing adoption is because it creates clear benefits for both issuers and merchants.
For issuers, tokenization enhances fraud prevention. Because the original PAN is never exposed and transactions are tied to contextual metadata, tokens are more secure and easier to verify than traditional card data. This allows issuers to reduce false positives in fraud detection and approve more legitimate transactions.
For merchants, the benefits are equally compelling. Higher authorization rates, lower customer churn, and fewer operational disruptions from expired cards all contribute to better business outcomes. Additionally, upcoming cost changes — such as new acquirer integrity fees for non-tokenized e-commerce transactions in Europe — make network token adoption financially advantageous.
Ultimately, network tokenization creates a more secure, more efficient, and more effective payment ecosystem for all stakeholders.
Network tokenization has evolved from a security measure to a performance driver. By addressing key issues with traditional PAN-based payments — such as static credentials, fraud risk, and manual card updates — it provides merchants with a practical and proven way to improve authorization rates.
The benefits are clear: better trust signals for issuers, fewer failed payments, and more consistent revenue for merchants. With growing industry support and quantifiable improvements, network tokenization is becoming an essential part of any forward-looking payment strategy.
But it’s important to remember that network tokenization alone doesn’t guarantee success and should always be considered as part of a broader strategy — especially when your goal is to improve approval rates. Approvals are impacted by a combination of factors, including issuer-specific rules, customer spending behaviors, data quality, and technical integration. To unlock the full value of network tokens, they should be used as part of a broader payments strategy — for example by incorporating advanced fraud tools, frictionless 3D Secure flows, card validation checks, wallet support, and so on.
At PCI Proxy, a division of Planet, we’ve been working in the tokenization space for over 24 years. Our provider-agnostic token vault supports network tokens from Visa, Mastercard, and American Express. In 2024 alone, we processed more than 2 billion token operations globally, helping merchants protect card data while optimizing payment performance across a wide range of modular solutions.
If you're exploring how to improve payment acceptance and reduce churn, we’d be glad to help you explore how network tokenization can support your goals.
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