Payment tokenization is evolving. Are issuers ready for what comes next?

Digital payments have to strike a difficult balance: keeping transactions secure without adding friction that leads to failed payments, abandoned purchases or frustrated customers.

Payment tokenization has become an important part of that equation. By replacing sensitive payment credentials with secure digital tokens, it can help reduce the exposure of card data while supporting safer, more reliable digital transactions.

For banks and payment issuers, however, the role of tokenization is beginning to extend well beyond its traditional focus on fraud, authorisation and compliance.

Research commissioned by Thales points to a shift in priorities. As organisations modernise their payments infrastructure and prepare for new forms of digital commerce, tokenization is increasingly being considered not simply as a solution to individual payment challenges, but as part of the foundation for how digital payments will operate in the future.

So, how far has the industry really progressed, and what will it take to turn that ambition into reality?

Why tokenization matters

Digital payments are under pressure from both sides. E-commerce continues to grow, while fraud is becoming more frequent and sophisticated. At the same time, false declines and unnecessary payment friction can frustrate legitimate customers, potentially costing business revenue and damaging trust.

It’s no surprise, then, that many of the reasons banks and issuers use tokenization today are practical ones.

Among 537 senior payments decision-makers surveyed globally, 68% cited reducing fraud losses and chargebacks as a leading driver of their tokenization strategy. Improving payment authorisation rates was cited by 64%, with the same proportion pointing to meeting evolving payment scheme and compliance requirements.

In other words, tokenization is already doing an important job: helping make payments safer, more reliable and compliant. But that’s only part of the opportunity.

The role of tokenization is expanding

Priorities from banks and issuers are changing. 

Today, only 20% of respondents identify improving customer experience as a primary driver for tokenization. Over the next 24 months, that rises to 45%. Creating a consistent payment experience across different channels follows a similar pattern, rising from 23% to 44%.

The biggest shift is around digital modernisation. Just 15% identify accelerating modernisation and moving away from legacy customisations as a key driver today. Looking ahead two years, that figure rises to 61%. 

For consumers, much of this work will remain invisible. But the intended outcome is very visible: safer online shopping and payment experiences that work more consistently across websites, apps and other digital channels.

From tactical tool to strategic foundation

The direction of travel is clear. Tokenization is increasingly expected to do more than address immediate risk, authorisation and compliance pressures. Issuers are looking towards broader outcomes spanning customer experience, payments modernisation and readiness for new models of commerce.

Yet ambition and execution do not always align. Nearly three-quarters of respondents describe their strategy as structured and expanding or token-centric, while only 18% report operating an advanced, token-first architecture today.

That gap raises an important question for banks and issuers: what will it take to move from using tokenization to solve today’s payment challenges to building a token-centric foundation for what comes next?

What AI-assisted commerce means for payments

AI-assisted commerce opens the possibility of AI agents searching for products, making choices and initiating purchases on a customer’s behalf. That creates new questions around how those payments can be made securely and with the right level of trust and control.

For now, preparation is at an early stage. Just 6% of respondents identify preparing for AI-agent-assisted commerce as a primary driver for tokenization today. Over the next 24 months, that rises to 21%.

It may still be an emerging priority, but it shows how quickly the role of tokenization is broadening.

Preparing payments for what comes next

Tokenization started by addressing some very immediate challenges around payment security, fraud and performance. Those needs haven’t gone away.

What is changing is the bigger picture.

Banks and issuers increasingly see tokenization as a way to support better customer experiences, modernise payments and prepare for new ways of shopping and paying. The challenge now is turning that ambition into reality.