Network Tokenization: what it is and why it helps you build loyal customers

November 1, 2022
5 min read
“Network Tokenization is a simple, yet powerful concept: conceal and devalue sensitive payment data to stay ahead of fraudsters and make digital payments more secure.”

Jack Forestell, Executive VP and Chief Product Officer, Visa (Aug 2022)


-       An introduction to network tokenization

-       Network tokenization and improved customer experience

-       The future of network tokenization

An introduction to network tokenization

Network tokenization is a concept introduced by the major payment card networks (Visa, Mastercard, Discover and American Express) which replaces the 16-digit card payment number, or primary account number (PAN) with a unique digital token. This unique token is then used across the entire payment process instead of sensitive card data, thereby significantly improving the security and success rate of the transaction.

Network tokenization has grown at a rapid rate since its introduction in 2019 as it reduces the potential for fraud, improves the merchant and consumer experience, increases payment approval rates, and reduces overall transaction costs. For more information on PCI Proxy's network tokenization service you can read our developer docs here or contact us using the form below.

How does network tokenization improve customer experience?

Reducing the risk of fraud

According to research carried out by Juniper, retailers are forecast to lose $130 billion globally in card-not-present fraud over the next 5 years. Retailers are already spending $3.48 to combat every dollar of fraud so this is clearly an “increasingly challenging task” for e-commerce businesses. By using a unique EMV payment token instead of card data, network tokenization significantly reduces the risk of fraud that all e-commerce customers and merchants face.

Reducing false payment declines

The other major challenge that retailers seek to address is false payment declines. According to research carried out by Javelin, 32% of customers stop shopping with a retailer after a false decline, and unnecessary declines outstrip actual fraud 13 times over.
So the problem of fraud and false declines affects both merchants and consumers, and network tokenization addresses both of those challenges. Network tokens can increase approval rates to reduce instances of false declines. This is because tokenized transactions are inherently more secure so less likely to be viewed as risky by the payment providers and issuing banks. Moreover, because network tokens are automatically updated by the card networks in line with the data of the underlying card, network tokens can combat payment friction that emerges over the lifecycle of a card, such as at the point of card expiry or card loss and replacement.

Lower merchant transaction fees with network tokenization

As a result of the streamlining and security benefits caused by network tokenization, Visa, Mastercard and American Express offer reduced fees on tokenized transactions. This is both to incentivize merchants to embrace this new technology, but also because the costs involved with tokenized transactions are lower for the card networks.

The future of network tokenization

Network tokens have twin benefits of improving user experience and reducing fraud, the latter in turn supports increased authorization rates. It is no surprise then that VTS has seen a sharp surge in demand for network tokens over the past 12 months. E-commerce has increased by more than 50% during the pandemic. As customers increasingly shift to online, those merchants who ensure that their online payments solution is frictionless and secure will come out on top. For more information on how network tokenization will enable you to reduce the risk of fraud, decrease your payment fees and improve customer experience, contact us using the form below.


*Jack Forestell, Executive VP and Chief Product Officer, Visa (Aug 2022)

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Iola Hopkinson
Marketing Manager

Iola brings 5+ years' experience in financial communications and fintech marketing to the PCI Proxy team.

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