What is network tokenization and how does it work?

Security does not have to come at the expense of the customer experience. Enter network tokenization which can help improve customers’ data protection while creating a seamless checkout process.

Learn about network tokenization, how it works, the biggest benefits of this security solution, and how to implement network tokenization for your business.

What is network tokenization?

Tokenization is the process of creating a string of numbers to represent the real numbers on a credit card. Instead of storing customers' sensitive data in their payment vaults, businesses can instead store this encrypted token — helping to protect customer information from data breaches and fraud.

Businesses have been using tokenization for several years to help securely store customer data. Now, with network tokenization, customers' card networks are included in the encryption process. When a customer goes to pay, the encrypted token is used to complete the transaction, instead of their sensitive data — creating a more seamless, end-to-end checkout experience.

Since networks are responsible for creating and managing these tokens, they can also help protect businesses from the risks of fraudulent transactions, as well as streamline payment and authorization processes.

How does network tokenization work?

Here's an overview of how network tokenization works:

  • A customer enters their credit card information on a business’s website.
  • The customer agrees to save their payment information for future purchases.
  • The business sends the customer's card information to the card network, such as Visa or Mastercard.
  • The card network creates a unique network token, which the business stores in their payment vault.
  • The customer returns to check out and uses their saved payment information.
  • The business shares the network token with the card issuer to securely complete the transaction.

It's important to note that card networks generate unique tokens for each business. While credit card information can be duplicated or used by fraudsters to make purchases with other retailers, the same cannot be done with tokens.

Network tokens aren't static, either. If a customer’s card is lost or stolen, the card network can update the token accordingly. From the customer’s point of view, everything is handled behind the scenes, and they don't have to re-enter their information if their card details change. As a result, customers can seamlessly make repeat purchases and businesses can increase authorization rates.

Benefits of implementing network tokenization

Network tokenization is the future. Not only is it more secure and less costly than other data security solutions, but it can also help businesses reduce latency and improve the customer experience. As a result, network tokenization is becoming the new paradigm for payment security.

Here's a closer look at the most notable benefits of implementing network tokenization for your business.

Enhanced security

Since network tokens are encrypted, they can help improve payment security and reduce the risk of fraud. Even if someone was able to intercept a tokenized transaction, they’d have to decrypt the code. And, unlike a regular credit card number, tokens can't be duplicated or used with another retailer since each one is merchant-specific.

Businesses can also use tokenization to help maintain network compliance and meet Payment Card Industry (PCI) regulations for safely storing customer information.


Network tokenization can help streamline the payment authorization process, which in turn may improve operational efficiency and can help reduce the costs of failed transactions.

When tokenization is enabled, each customer’s card information is securely stored and easily accessible for future purchases. And since card networks are responsible for updating customer information, businesses don’t have to use valuable resources to manually make those changes and keep data fresh.

Streamlined payment processes

Network tokenization can help improve payment optimization and reduce friction in the checkout process, making it easier for returning customers to autofill their safely stored information and complete transactions in just a few steps.

Considerations of implementing network tokenization

Network tokenization can be complex. With the right payment solution, businesses can prepare to address certain challenges of tokenization, including:

  • Updating card information. Network tokens should undergo regular lifecycle management updates to keep card data fresh and minimize false declines, especially for businesses with subscription programs and many repeat customers.
  • Meeting compliance standards. Tokenization should adhere to changing PCI regulations, ensuring customer card information is secure.
  • Collecting real-time data. Your payments platform should provide real-time data about how and when tokenization was used to complete transactions, so you can continue to optimize customer experiences and enhance approval rates.

Will adopting network tokenization disrupt my business?

Choosing the right payments platform is critical. Businesses should have a partner who can guide them through the implementation process to help mitigate the risk of lower authorization rates at the beginning and craft hybrid strategies that are tailored to their unique business needs. In fact, 48% of PayPal Braintree users surveyed say they implemented tokenization to improve customer service.1

How companies can adopt network tokenization

Businesses can work with their payments platform to integrate network tokenization into their existing system. PayPal Braintree, for example, makes it simple for businesses to enable network tokenization.

As new cards are added to your payment vault, Braintree automatically works with the card networks to generate secure, PCI-compliant tokens for future transactions.

With the Account Updater feature, Braintree also automatically requests updates for cards that are expired or replaced, helping to reduce failed transactions, increase revenue, and improve customer experiences.

How is PayPal helping to advance network tokenization?

With 850 million cards tokenized, PayPal Braintree is already one of the biggest token service providers in the world. With our scale, we work with card networks to innovate at the cutting edge of network tokenization. Our relationships with card networks allow us to be early adopters of new network token technologies that can help businesses take full advantage of the growing ecosystem.

To learn more about protecting your business, download the latest issue of The Stack, which is all about helping you safeguard your business in an age of relentless fraud.

Read "The Stack" (PDF)

Read "The Stack" (PDF)

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