Tokenization is a process that safeguards sensitive payment information by replacing it with unique, non-sensitive identifiers known as tokens. These tokens securely map to the original payment credentials but are disguised in a way that even hackers would not be able to use them. This extra layer creates a much more secure and safe payment process and allows merchants to store payment information more securely.
Through disguising and more safely storing payment information, tokenization has become a core part of payment operations for merchants and payment service providers (PSPs). Two types of tokens are currently available, network tokens and payment tokens, and they have one main difference. That difference is the point of origination: Credit card companies such as Mastercard or Visa create network tokens, whereas processors such as Stripe or PayPal create payment tokens.
- TOKEN AVAILABILITY: Most merchants already enable payment or network tokens, and adoption is even more widespread among higher-revenue companies.
- DIGITAL WALLETS: Merchants are most likely to use network tokens to enable card payments via digital wallets, with card-on-file payments second-most popular.
- CUSTOMER EXPERIENCE: Merchants and PSPs report enabling network tokens has myriad benefits, including a better customer experience and an improved ability to store information.
- INCREASING USE: Most merchants and nearly all PSPs plan to use more network tokens — and soon.
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