> ## Content Index > Fetch the complete content index at: https://www.thenextvertical.com/llms.txt > Use this file to discover other available public pages before exploring further. # Tokenization Data Security in Banking: How It Protects Card Data - URL: https://www.thenextvertical.com/tokenization-data-security-in-banking-how-it-protects-card-data/ - Published: 2026-11-14T18:11:01.000Z - Updated: 2026-11-14T18:11:01.000Z - Description: In this report: how tokenization protects payment card information in 2026, how network and gateway tokens differ, and what banks should consider when choosing a solution. - Author: The Next Vertical - Tags: AI In Finance Banks process large volumes of card payments across mobile wallets, online stores, subscriptions, and traditional payment channels. Each transaction involves sensitive customer information, including card details that need to be protected. The more often original card details are stored or shared, the more opportunities there may be for that information to be exposed. Tokenization offers a way to reduce this exposure. It replaces sensitive card details with a substitute value, called a token. Businesses and payment providers can use that token for supported transactions without needing to handle the original card number in the same way. But not all tokens work alike. Network tokens and gateway tokens are two common approaches, and each serves a different purpose. This report explains how they work, what separates them, and what banks should look at before adopting a tokenization solution. **Key Takeaways** - Tokenization replaces sensitive card details with a substitute value, helping reduce how often the original information is exposed. - Network tokens are managed by card networks or their token service providers and are commonly used for mobile wallets and online payments. - Gateway tokens are managed by payment gateways or processors and are often used for saved cards and recurring payments. - The security features of a token depend on how it is created, managed, and used. - Tokenization can reduce the number of systems that handle real card numbers, but it does not automatically remove PCI DSS obligations. - Banks should consider provider dependence, customer protection, system compatibility, and compliance before choosing a solution. **The 2026 Market Backdrop: Why Payment Security Matters** Digital payments have changed how customers use their bank cards. A customer can now pay with a phone, save a card with an online retailer, or set up a subscription without entering their details every time. These services make payments easier, but they also mean card information can pass through several different businesses and systems. An online card payment, for example, may involve the retailer, the merchant's acquiring bank, a payment gateway, a payment processor, a card network, and the customer's bank. The exact arrangement varies, and some providers perform more than one role. For banks, the challenge is to protect customer information while keeping payments convenient. Tokenization is one way to address that challenge. Instead of using the original card number in every part of the payment process, a token can be used in supported situations. Visa reports indications that tokenization can support payment performance. At its February 2025 Investor Day, Visa reported that e-commerce transactions using tokenized Visa payment credentials had a 4.7 percentage-point higher authorization rate than transactions using non-tokenized card credentials. Visa also reported a 34% lower e-commerce fraud rate for tokenized transactions. These are figures reported by Visa for Visa payment credentials, not independently verified results or guaranteed improvements for every bank or payment provider. The wider point is that payment security is not only about preventing data exposure. Banks also want payment systems that work reliably and provide a good customer experience. **Why Banks Are Moving Card Data onto Tokens** The case for tokenization is built around three practical benefits. **Reducing exposure of customer information** When a business stores real card numbers, those details become sensitive information that needs to be protected. If the business uses a token instead, it may reduce the number of places where the original card details are stored or handled. **Making stolen card details less useful** Some tokens, particularly network tokens, have restrictions on where and how they can be used. These restrictions can make them harder to misuse outside the intended payment environment. Gateway-token protections depend on the provider and its security controls. A token should not automatically be assumed to have the same restrictions as a network token. **Supporting convenient payments** Customers expect to save their cards, use mobile wallets, and make repeat payments without entering their card details each time. Tokenization helps support these services while reducing the need to share the original card number. Tokenization does not prevent every type of payment fraud. Its main benefit is reducing the exposure of original payment details. **What "Tokenization Data Security" Actually Means** In simple terms, tokenization means replacing sensitive information with a substitute value. Imagine a customer pays online using a bank card. The retailer needs a way to process the payment, but it does not necessarily need to keep the customer's actual card number. A payment provider can create a token to represent the card details. The retailer then uses that token for supported payments. Depending on how the system is designed, the link between the token and the original card details may be held in a protected system or managed through another secure method. The customer can continue making payments without the retailer needing to handle the original card number every time. For banks, the important point is that a token is not simply another name for a card number. Its security depends on how it is created, where it can be used, and who is responsible for managing it. Before choosing a solution, banks should ask: 1. Who creates and manages the token? 2. Where can the token be used? 3. What happens if a token or the account managing it is compromised? 4. Can a token be stopped or updated if a card is replaced or reported lost? 5. What happens to existing tokens if the bank or merchant changes providers? These questions help banks understand what protection a solution actually provides. **Network Tokens vs. Gateway Tokens: The Main Options in 2026** Network tokens and gateway tokens are two common approaches to card-payment tokenization. Both replace the original card details with a substitute value. The main difference is who manages the token and how it is used. | **Feature** | **Network tokens** | **Gateway tokens** | | ------------------ | ----------------------------------------------------------------------------- | ------------------------------------------------------------------------- | | Who manages them? | Card networks or their token service providers | Payment gateways or processors | | Common use | Mobile wallets and online payments | Saved cards and recurring payments | | Main purpose | Protect card details across supported payment environments | Let businesses use substitute values instead of storing real card numbers | | Security | May include restrictions on devices, merchants, or payment situations | Depends on the provider's design and security controls | | Portability | May work across participating environments, but migration can still be needed | May be tied to the provider that created the token | | Main consideration | Compatibility with card networks and payment systems | Provider dependence and arrangements for moving tokens | **1\. Network Tokens: The Mobile Wallet and Online Payment Option** Network tokens are created through services provided by card networks or their token service providers. A familiar example is adding a bank card to a mobile wallet. Instead of relying on the original card number for every payment, the wallet can receive a network token. When the customer pays with their phone, the payment uses the token rather than sharing the original card number in the usual way. Network tokens can also have additional security restrictions. For example, a token may be limited to a particular device or payment situation. Some transactions use an additional changing security code to help prevent copied payment information from being reused. For banks, network tokens are particularly relevant to: - Mobile wallet payments. - Online card payments. - Digital payment services that support network tokenization. One important consideration is compatibility. Network tokens are designed to work within participating payment environments. If a bank changes its payment arrangements, it may still need to organize a token migration. **2\. Gateway Tokens: The Saved Card and Recurring Payment Option** Gateway tokens are usually created by payment gateways or payment processors. Imagine a customer regularly buys products from the same online store. The customer chooses to save their card details so they do not have to enter them again next time. The store needs a way to recognize the customer's payment method. Instead of storing the actual card number, its payment provider can give it a token. When the customer makes another purchase, the store uses that token to process the payment through the provider. Gateway tokens are commonly used for: - Online stores that let customers save their cards. - Subscription services that charge customers every month. - Businesses that process repeat payments. The security of a gateway token depends on how the provider has designed and protected its system. A gateway token should not automatically be assumed to have the same restrictions as a network token. For example, if someone gains control of a merchant's payment account, they may be able to misuse stored payment details. Protecting the merchant account is therefore important too. Another consideration is provider dependence. If a business changes payment providers, its existing tokens may not work with the new provider. Banks and merchants should ask about token transfer and migration before choosing a solution. **3\. Tokenized Deposits: A Different Type of Token** Tokenized deposits are not the same as network or gateway tokens. Instead of replacing a card number, a tokenized deposit represents money held in a customer's account at a commercial bank. Banks are exploring tokenized deposits for institutional payments and other financial services. However, they raise different questions, including how customers can redeem them and what legal rights they have. For that reason, tokenized deposits should be treated as a separate banking and settlement topic, not as another type of card-payment security token. **What Banks Should Consider When Choosing a Solution** There is no single tokenization solution that fits every bank or payment service. The right choice depends on the payments the bank supports and the problems it wants to address. Five checks can help banks compare providers. **1\. Who manages the tokens?** Banks should understand whether tokens are created and managed by a card network, a payment gateway, a processor, or another provider. This matters because the provider is responsible for important parts of the token service, including how tokens are issued, managed, and updated. **2\. Where can the tokens be used?** Some tokens are designed for particular payment environments. Network tokens may have restrictions linked to a device, merchant, or payment situation. Banks should understand these restrictions and check that the token can be used in the payment services they want to support. **3\. What happens when a card is replaced?** Customers lose cards, report fraud, and receive replacement cards. Banks need to understand how tokens are updated or stopped in these situations. A good process should avoid unnecessary disruption for customers while protecting them from unauthorized payments. **4\. Can tokens be moved to another provider?** Some gateway tokens are tied to the provider that created them. If a bank or merchant changes providers, moving existing tokens may require additional work. Banks should ask about migration before signing an agreement. It is easier to understand these limitations before a provider change becomes necessary. **5\. Does the solution work with existing systems?** Tokenization needs to fit into the bank's current payment processes. Banks should check compatibility with their card systems, payment providers, digital channels, and customer support processes. A solution that offers strong security but is difficult to integrate may create operational problems. **Compliance and PCI DSS: What Banks Need to Know** Banks must protect payment information and follow relevant security standards. One important standard is PCI DSS. In simple terms, it sets requirements for businesses that store, process, or transmit payment card information. Tokenization can help reduce the number of systems that handle real card numbers. This may mean fewer systems need to be included in a bank's PCI DSS assessment. However, introducing tokenization does not automatically remove compliance obligations. For example, systems that store the original card details still need protection. Other systems connected to them may also remain within the scope of the requirements. The PCI Security Standards Council provides guidance on how different types of tokens are treated. The exact requirements depend on how the solution is designed and which systems are involved. Banks should work with their compliance and security teams to understand which requirements apply to their particular setup. **Choosing by Banking Use Case** The right type of tokenization depends on what the bank or business wants to achieve. - **Bank supporting mobile wallets:** Network tokens are often the relevant option because they are designed to work with card-network payment services. - **Retailer or business saving customer cards:** Gateway tokens can be suitable for online stores, subscriptions, and repeat payments. - **Bank supporting several payment services:** A combination may make sense, with network tokens for supported wallet and online-payment services and gateway tokens for stored-card arrangements. - **Bank exploring digital deposits:** Tokenized deposits should be assessed separately because they represent money held at a bank, rather than replacement card details. The important point is to start with the business need. A bank should not choose a solution simply because it is described as tokenization. **Risks and Limitations** Tokenization can improve payment security, but it does not remove every risk. **Account takeover:** If criminals gain access to a customer's account or device, they may still be able to misuse payment services. **Lost or stolen devices:** A lost phone may create a risk if the customer's digital wallet and device are not properly protected. **Provider dependence:** Some gateway tokens may not work with a new payment provider, making a change more complicated. **Weak protection of original card details:** Tokenization does not remove the need to protect the original card information wherever it is stored or managed. **Poor access controls:** Employees or other unauthorized users should not be able to access sensitive payment information without permission. Tokenization is also not the same as encryption. Tokenization replaces the original information with a substitute value. Encryption changes information into a protected form that can be read again using the correct key. Banks may use both methods alongside other security measures, such as customer authentication, fraud monitoring, and access controls. Performance figures from providers should also be treated carefully. Visa's reported results are useful context, but they do not guarantee the same results for every bank or payment service. **Examples of Companies Providing Tokenization Solutions** Here are five examples of companies providing tokenization solutions across different parts of the payment industry. They are listed alphabetically, not ranked. | **Company** | **Main tokenization offering** | **Where it fits** | | ---------------- | -------------------------------------------------- | -------------------------------------------------------------------------------------- | | American Express | American Express Token Service (AETS) | Payment tokens for American Express digital wallets and saved-card payments | | Fiserv | Carat Encryption and Tokenization | Merchant-side and omnichannel payment-data protection | | Mastercard | Mastercard Digital Enablement Service (MDES) | Network tokens for mobile wallets and online payments | | Thales | Thales Tokenization and payment security solutions | Token creation, provisioning, lifecycle management and payment security infrastructure | | Visa | Visa Token Service (VTS) | Network tokens for mobile wallets and online payments | **American Express.** Provides tokenization services that replace card numbers with tokens for digital wallets and saved-card payments. **Fiserv.** Offers encryption and omnichannel tokenization through its Carat platform, helping merchants protect payment data across sales channels. **Mastercard.** Provides network tokenization through Mastercard Digital Enablement Service (MDES), supporting secure mobile wallet and online payments. **Thales.** Supplies payment security and tokenization technology, including tools for token creation, provisioning, and lifecycle management. **Visa.** Provides network tokenization through Visa Token Service (VTS), replacing card numbers with tokens for digital payments. **Conclusion** Tokenization is an important option for banks that want to reduce the exposure of customer payment information. The basic idea is straightforward: use a substitute value instead of the original card details, so fewer businesses and systems need to handle the real card number. Network tokens are commonly used for mobile wallets and online payments. Gateway tokens are often used by businesses that save customer cards for future purchases or subscriptions. Neither option is automatically right for every situation. Banks need to understand who manages the tokens, how they are protected, where they can be used, and what happens if they change providers. Tokenization is not a complete security solution, but it can be a useful part of a bank's wider approach to protecting payment information. The practical decision is to identify the payment need first, compare the available options, and choose a solution that the bank can protect and manage over time. **FAQs** **1\. What is tokenization in banking?** Tokenization is a way of protecting sensitive information by replacing it with a substitute value, called a token. In card payments, the token is used instead of the customer's real card number. **2\. What is the difference between network tokens and gateway tokens?** Network tokens are managed by card networks or their token service providers and are commonly used in mobile wallets and online payments. Gateway tokens are managed by payment providers and are often used by businesses that save customer card details for future payments. **3\. Does tokenization prevent payment fraud?** No. Tokenization can make exposed card details less useful, but it cannot prevent every type of fraud. Banks still need to protect customer accounts, check suspicious transactions, and use other security measures. **4\. Is tokenization the same as encryption?** No. Tokenization replaces the original information with a substitute value. Encryption changes information into a protected form that can be read again using the correct key. Banks may use both methods to protect payment information. **5\. Does tokenization remove PCI DSS requirements?** No. Tokenization may reduce the number of systems that need to be included in a PCI DSS assessment, but it does not automatically remove the requirements. Banks should confirm the position with their compliance and security teams. **6\. Are tokenized deposits the same as network tokens?** No. Network tokens replace card details during payments. Tokenized deposits represent money held at a commercial bank. They serve different purposes. --- **Disclaimer:** This report is for informational purposes only and does not constitute legal, financial, or compliance advice. Requirements vary by country and by the design of each tokenization solution. Performance figures cited from Visa are reported by the company and should not be treated as guaranteed outcomes.