Despite the rapid technological advances of recent years, the payment experience continues to cause difficulties for both consumers and businesses.
Customers often abandon their purchases when they encounter time-consuming checkout forms or when their card is declined.
Businesses, for their part, face an increased risk of fraud, chargebacks and loss of revenue due to expired card details or failed transactions.
These seemingly small interruptions accumulate and create friction, which hurts trust and negatively affects the customer's decision to complete the purchase, in almost every industry that operates online.
Although modern commerce requires speed and security, the infrastructure behind payments has not evolved at the same pace. Many processes still rely on the customer's typing of card details, fixed – and often vulnerable – identifiers, and systems that do not communicate with each other. And as the volume of transactions increases and the demands of users become more complex, the cost of this inefficiency increases.
Within this framework, tokenization technology is constantly gaining ground as a key solution for modernizing payment infrastructure. This technology replaces sensitive card details, such as a customer's 16-digit card number, with a randomly generated digital identifier, called a token. This token can be stored securely and used to complete payments, without revealing the card's real details. This significantly reduces the risk of a data breach and makes the customer experience simpler and more secure.
At its core, tokenization technology eliminates the need to pass or store sensitive data in the merchant's systems. When a customer initiates a payment, their card details are securely transmitted to a tokenization service provider, such as Mastercard, which creates a token that represents that card. The actual assets are stored in a secure environment (vault), while the merchant only receives the token for future use. These tokens can only be activated for use on specific channels, devices, or businesses, offering even greater protection against unauthorized use.
The value of tokenization is both technical and strategic
This technology is now adopted as a standard infrastructure for payments in many markets, as it serves a key business goal: to reduce transaction risk and improve the payment experience. Simpler, faster, more reliable.
For consumers, this means they no longer need to re-enter card details for repeat purchases or update them when the card expires. In tokenization-based systems, credentials can be automatically renewed, reducing failed payments, which is especially important for subscription services or recurring billing.
For businesses, tokenization technology provides a solution to multiple challenges. First, it helps reduce fraud, a problem that continues to be a serious concern for e-commerce. Additionally, it helps improve payment approval rates by ensuring that transactions are based on the latest card details, which are accompanied by additional information that enhances the accuracy of verification.
Also, because sensitive card details are never stored in the merchant's systems, compliance with PCI DSS (Payment Card Industry Data Security Standards) becomes simpler, simplifying operations and reducing risk exposure.
In a broader context, tokenization technology shows the shift from fixed payment details to more dynamic and flexible forms of identification, adapting to the needs of each transaction. This development follows the general trajectory of the digital finance sector, where consumers now expect payments that offer convenience, control and a smooth experience without delays. Payments must be made in the background, quickly, reliably and securely, protecting personal data and reducing unnecessary steps to complete a transaction.
Mastercard has played a central role in promoting tokenization on a large scale. In 2014, it introduced the Mastercard Digital Enablement Service (MDES), which was designed to create and manage tokens securely, covering e-commerce payments, mobile wallets, contactless transactions, and in-app purchases. Today, Mastercard reports that almost half (49%) of its e-commerce transactions in Europe are now made using tokenization.
In June 2024, Mastercard took another decisive step, announcing its intention to phase out the typing of card details for online payments in Europe by 2030. Its goal is to completely eliminate the use of static card numbers as a basic means of identification in e-commerce and replace them with tokens, which will be automatically issued by banks at the time of issuance of each card. The company's position is clear: tokenization is not just an additional safety net, but a strategic infrastructure for the next stage in digital payments.
Fostering realistic and actionable innovation in digital payments
Payment providers and technology platforms are actively supporting this transition, helping merchants implement tokenization technology in practical and flexible ways. payabl., one of Europe's leading payment technology providers, specializing in digital transactions, supports businesses from various sectors in adopting secure and modern payment solutions.
Through its partnership with Mastercard, payabl. It helps businesses modernize the way they manage their transactions, reduce the risk of fraud, and increase payment success. Its role is instrumental in the transition from theory to practice, transforming tokenization technology from a technological concept into everyday reality, helping its customers meet the ever-increasing demands for secure and smooth digital payments.
Tokenization technology offers both immediate and long-term benefits for businesses operating in an increasingly complex digital environment. Technology contributes to more efficient payments and, at the same time, lays the foundations for future innovation. As new payment channels such as wearables, integrated payment solutions, and Internet of Things (IoT) transactions become increasingly prevalent, tokenization offers the flexibility and security needed to support them.
Another major advantage of tokenization technology is that it can be easily implemented on a global scale. Because it works within the existing infrastructure of card networks and is supported by major issuers and payment providers, tokenization technology can be applied consistently across different countries and markets. This opens up new opportunities for cross-border transactions, expansion into multiple markets and a single customer experience, which are becoming increasingly important as digital commerce transcends geographical boundaries.
As more and more players adopt this technology, the payments landscape is gradually transforming towards solutions that prioritize security, without sacrificing speed or convenience. The move away from manual data entry and static data is not just a response to growing digital threats, it reflects the new expectations of consumers and businesses from fintech.
Tokenization technology is no longer just an extra feature. It is emerging as a new infrastructure that enhances security, enables innovation and redefines the way digital transactions take place on a global scale.
