What is tokenization?
Tokenization is a security technology that replaces sensitive account information, such as the 16-digit primary account number (PAN) that can be found printed on a consumer’s card, with a unique digital identifier called a token. With tokenization, cards can be pushed to digital wallets such as Apple Pay and Google Pay1 for contactless payments or stored with merchants for online payments. The token then allows payments to be processed without exposing actual account information. Tokens impact the entire payment ecosystem, benefiting issuers, acquirers, merchants and consumers.
The value of Visa Token Services
- Enabler of innovation- Tokens allow the use of digital credentials regardless of channel, device or form factor (i.e., Tap to Pay, Click to Pay, Scan to Pay, IoT and accounts.)
- Increased authorization- 3% global authorization rate lift for Visa credit and debit card-not-present transactions for tokenized vs. non-tokenized credentials. 2
- Enhanced security- Tokenization helps protect exposure of sensitive data and Visa Tokens have seen a 28% reduction in fraud vs. PAN-based transactions. 3
- Lower interchange fee- Merchants find benefits using tokens over PANs such as the lower interchange rate fee for tokens.
In addition, tokenization reduces friction in the payment process by enabling financial institutions to update compromised or expired payment credentials without needing the customer to make manual updates themselves. These core value propositions fuel the rapid growth in the usage of Visa Tokens.
Continuing strategy to secure digital payments
Since launching in 2014, VTS has experienced rapid growth, issuing 1 billion tokens by 2020, 2 billion in 2021 before doubling again in 2022. The soaring popularity of VTS is additionally driven by its offerings of safer online transactions in a time where consumer’s spending preferences have shifted to digital.
"Despite the explosive growth tokens have experienced, we see this to be a beginning of the journey for secure and seamless payments." Jalpesh Chitalia, vice president of product at Visa, said. "We have barely scratched the surface and are working on new strategies for several zero -1 products, along with scaling tokenization while inventing the future payment credential."
As Visa continues to innovate, the company hopes to further drive growth in VTS. “This milestone is indicative of the continued investment Visa is making in safe, reliable and seamless transactions around the globe,” Jack Forestell, chief product officer at Visa, said. “Continued adoption of tokenization will help enable Visa’s mission of helping individuals, businesses and economies thrive.”
How to get started
For interested merchants, please reach out to your acquirer partner. For acquirers, learn more or start a project on VDP by visiting our Visa Token Service and Visa Token Service Provisioning and Credential Management product pages.
1 All brand names, logos and/or trademarks are the property of their respective owners, are used for identification purposes only, and do not necessarily imply product endorsement or affiliation with Visa.
2 Authorization rate is defined as approved count of unique transaction authorizations divided by total unique authorization attempts, based on first authorization attempt only (global average). VisaNet Jan-Mar 2022.
3 Visa, Inc, Q4 2021 Earnings Call.
