Tokenized payments replace sensitive payment details with secure digital tokens that are safer to store, transmit, and reuse. Tokenization is a key part of global payment systems: in 2025, there were 283 billion global network tokenized transactions, and that number is expected to double by 2029, rising to 574 billion. From financial institutions adopting network tokens to real estate and gaming platforms trading tokenized assets, the technology is expanding far beyond checkout.

Below, we’ll discuss what tokenized payments are, how they improve payment security and traceability, which industries are adopting them, and what it takes for businesses to integrate tokenization into their payment systems.

What’s in this article?

• What are tokenized payments?
  
• How does tokenization improve security and traceability in digital transactions?
  
• Which industries are adopting tokenized payment models?
  
• What are the challenges associated with tokenized payments?
  
• How can businesses design payment flows that safely incorporate tokenization?
  
• How Stripe Payments can help
  

What are tokenized payments?

Tokenized payments turn something valuable, such as a credit card number, a bank account, or even an asset, into a digital stand-in called a token. If you’ve ever used a digital wallet such as Apple Pay or Google Pay, you’ve already made a tokenized payment.

Tokenization appears in the payments world in two main ways.

Payment data tokenization

The tokenization of payment data replaces sensitive financial information with a random string of characters that has no exploitable meaning. When a customer makes a purchase, the system generates a token to represent their actual card number, which is stored safely in a secure “vault.” The business processes the token, not the card itself. If fraudulent actors intercept it, it’s useless.

Asset tokenization

Asset tokenization takes the process a step further. Instead of standing in for a piece of data, the token represents ownership or rights to something concrete, such as a share of a property, a piece of art, or a unit of currency. These tokens live on a blockchain, where they can be transferred directly between parties without intermediaries. Tokens let users trade value securely, but with asset tokenization, the value can be anything.

How does tokenization improve security and traceability in digital transactions?

Tokenization keeps sensitive data secure and makes transactions more transparent without slowing the process.

Here’s how:

• Protected payment details: When a customer pays, their real account details are sent to a secure vault managed by a payment processor or network, which returns a randomized token in their place. The token stands in for the actual number, but it can’t be reverse-engineered. Because of this, tokenized transactions can reportedly cut fraud rates by up to 60%.

• Controlled use: Tokens can be bound to specific devices, businesses, or transaction types. Under the EMVCo tokenization framework, a token used on one device won’t work anywhere else.

• Built-in traceability: In blockchain-based systems, every token transfer is logged on a tamper-resistant ledger. This permanent record gives businesses and auditors real-time visibility into payment flows, which reduces disputes and improves accountability.

• Supply chain transparency: Tokenization also helps trace physical goods as they move through global supply chains. Each token transfer can represent a product as it changes hands, which makes counterfeiting and loss easier to detect.

• Reduced exposure: Businesses never store or transmit raw card data. They work only with tokens. This isolation lowers the risk of breaches and reduces the compliance burden under standards such as Payment Card Industry Data Security Standard (PCI DSS), since there’s less sensitive data to protect.

Which industries are adopting tokenized payment models?

The global market for payment tokenization is projected to reach $4.3 billion by 2031. From finance to gaming to real estate, tokenization is reshaping how money and assets move.

Finance and banking

Beyond cards, financial institutions are experimenting with tokenized money—such as stablecoins pegged to fiat currencies—to deliver instant, round-the-clock cross-border payments. Some banks are also testing tokenized deposits and settlement systems, and central banks are following suit by testing digital currencies that represent national money in token form.

Gaming and digital entertainment

Game developers have used tokenization to build in-game economies where players can own what they earn. In these ecosystems, digital items, such as weapons, skins, or virtual land, exist as blockchain tokens that can be bought, sold, or traded outside the game. This model gives players verifiable ownership and secondary market value for virtual assets. Non-fungible tokens (NFTs) enable uniqueness and provenance, while fungible tokens act as in-game currencies. Gaming studios are even exploring interoperability, which allows assets from one game to appear in another.

Real estate

Real estate firms are using tokenization to divide property ownership and unlock liquidity. Rather than buying an entire building, investors can buy tokens representing small shares of it. As of 2024, around 12% of global real estate companies had implemented asset tokenization, and nearly half were testing it or in early-stage implementation. These tokens can be traded on secondary markets, which makes real estate more accessible to smaller investors and speeds up transactions.

What are the challenges associated with tokenized payments?

Even as tokenized payments gain traction, a few persistent challenges remain:

• Interoperability: Many tokenized systems still operate separately. A token on one network can’t move to another, so it’s hard for businesses to grow and for individuals to use tokens everywhere. The Society for Worldwide Interbank Financial Telecommunications (SWIFT) and banks are exploring how tokenized assets might transfer more easily between different networks.

• Regulation: Rules haven’t yet caught up with innovation. What counts as a “tokenized security” in one country might be treated as a digital asset in another. This patchwork approach slows adoption and raises compliance costs. Regulators in regions such as the EU, and countries such as Singapore and the United Arab Emirates (UAE), are now shaping clearer frameworks for digital tokens, which could stabilize the regulatory environment.

• Consumer protection: Traditional payment systems come with safety nets, such as fraud monitoring and chargebacks, but some forms of tokenized payments don’t. If someone sends tokens to the wrong address, recovery can be difficult. Features such as multisignature verification, transaction limits, and accessible and intuitive recovery tools are necessary for building user confidence.

How can businesses design payment flows that safely incorporate tokenization?

When done well, tokenized payments can reduce risk, champion compliance, and boost user trust.

Here’s how your business can integrate it safely and effectively:

• Use strong infrastructure: Choose platforms with built-in tokenization instead of developing your own. Payment providers such as Stripe handle sensitive data securely and return only tokens to your systems. This keeps payment flows simple while reducing liability.

• Treat tokens as keys, not shortcuts: Restrict who or what can use tokens, encrypt communications end to end, and monitor activity for anomalies. You can also use audited smart contracts and verified custody tools to prevent exploits for blockchain-based tokens.

• Keep the process invisible to customers: Digital wallets, QR codes, and one-click checkout can all use tokens without changing the customer experience. When introducing new payment methods, such as stablecoin or loyalty tokens, communicate clearly and make fallback options easy.

• Explain how tokenized payments protect customer data: Offer recovery support, use two-factor authentication (2FA) for sensitive actions, and make transaction confirmations clear.

How Stripe Payments can help

Stripe Payments provides a unified, global payments solution that helps any business—from scaling startups to global enterprises—accept payments online, in person, and around the world.

Stripe Payments can help you:

• Optimize your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs, access to 125+ payment methods, and Link, a wallet built by Stripe.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalize interactions, reward loyalty, and grow revenue.

• Improve payments performance: Increase revenue with a range of customizable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorization rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.