Blog by Cigniti Technologies

The 4 Benefits of Tokenization in Digital Payments

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A token is a value that goes securely through the network to process payments without exposing actual card data. Tokenization aims to replace or represent specific sensitive information without compromising its security.

The 16-digit payment card account number is replaced with a unique digital identifier, or the “token,” for mobile and online transactions. The tokens are randomly assigned, so it’s near impossible to reverse-engineer or compromise a token.

Physical tokenization has existed since the invention of currency. Token coins replaced actual coins or banknotes in physical tokenization. These token coins have a real identity and value but limited usage. For example, casino tokens can only be used inside casinos.

The concept of digital tokenization came from the idea of physical tokenization. In 2001, Trust Commerce created the concept of tokenization to protect sensitive payment data for a client. After that, tokenization has gained acceptance worldwide with the involvement of card networks like VISA, Mastercard, American Express, Discover, and JCB, and payment platforms like Apple Pay, Samsung Pay, and Google Pay, facilitating tokenization in retail payments through mobile devices.

Tokenization benefits the payments industry in the following ways:

There is the different basis of classifications of tokens. It can be based on usage, formats, value and so on.

Specific format-preserving tokenization schemes maintain the IIN (first six digits) and the last four digits of the card number.

How does tokenization work for card payment transactions? 

Let us assume that a merchant has implemented tokenization. The card network that will process the payment transaction is the Token Service Provider.

An organization might self-manage tokenization or use tokenization as a Service (TaaS) offered by other third-party service providers.

Various credit card providers have tokenization mechanisms. Two of the most well-known are the Visa Token Service (VTS) and Mastercard’s Digital Enablement Service (MDES).

Some of the other tokenization providers in the market are Fiserv, American Express, TokenEx, 3D Delta Systems, Meawallet and BellID.


Each payment industry stakeholder benefits from implementing tokenization by gaining customer trust and preventing cost penalties and revenue loss. Stakeholders must determine the best tokenization solution for their organization and implement it accordingly.

To know more about tokenization and determine the path to implement tokenization in the organization, please reach out to Test Advisory Services | Software Testing Consulting Services (, who will help you achieve strategic business growth, committed ROI, and quicker time-to-market with Tokenization solution that will best serve your business need.


  • Payel Ghosh has 18 years of experience in diverse technology projects in the banking and payments domain. She has rich experience and knowledge in the payments value chain and in-depth subject matter expertise in payment processing. Payel is a consultant with Cigniti's BFSI Practice and Centers of Excellence that focuses on building deep domain competence and developing solutions for the challenges faced by the industry.

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