An era of tokens: The future of payments is moving from money to value

The task of securing the global movement of money is complex, particularly now.

And this complexity is set to compound even further as we transition to the age of value. The next era of payments has the potential to be even more transformational than the last.

Fundamentally, money has always been a store of value that could be spent in the future.

In the new token economy, where various assets are tokenised, and the issued tokens carry economic value, we are essentially shifting from transacting in money to transacting in value.

But what does tokenisation really mean for us as individuals, businesses and as a society?

Well so far, tokenisation technology has replaced a consumer’s sensitive permanent account number information with a token, which is a unique identifier that helps protect transactions when used for in-store mobile payments or online shopping.

Simply put, tokenization conceals and devalues sensitive payment data to stay ahead of fraudsters and make digital payments more secure.

This has made tokens the unsung heroes of the payments ecosystem, especially for the ecommerce sector.

Over the past pandemic years in particular, cyber criminals quickly cashed in on the increase in online activity to attack and exploit technical vulnerabilities.

According to estimates, e-commerce alone lost an estimated $41 billion to online payment fraud globally in 2022, up from the previous year.   And the figure is expected to grow further to $48 billion by 2023, which makes it that much more important to have the right protections in place to mitigate that number.

In this time, issuers, acquirers, merchants, and consumers have all seen a range of benefits from tokens including reduced fraud, ease of use across devices and more.

Here at Visa, analysis shows that Visa tokens have led to a 28 per cent reduction in fraud rates. Conversely in order to ensure that authentic shopping isn’t hampered, tokens have also led to a 3 per cent increase in approval rates across more than 8,600 issuers and 800,000 merchants, increasing sales for merchants while saving them money on fraud-related expenses. In fact, as of 2022, Visa issued more than 4 billion network tokens worldwide through Visa Token Service, marking a major milestone in its proprietary offering to help secure digital payments and further accelerate ecommerce innovation and acceptance.

This historic milestone, which nearly doubled Visa’s token count in one year, surpasses the number of physical Visa cards in circulation worldwide.

More importantly, it underscores the powerful security that tokens provide to merchants, issuers and consumers alike.

But tokens have the potential to do so much more than reduce payment fraud.

Tokenisation enables us to envisage a world in which any device with a digital heartbeat could be used to initiate or accept payments, that are transactions of value not money, across any channel.

In a token economy, digital tokens can act as a transferable unit and represent real-world assets or redemption utility such as loyalty points, discounts or rewards earned through various metrics.

In my recent conversation with Mathew Griffin, a world-renowned futurist and adviser to governments and major technology companies, on Visa’s Access Tomorrow podcast, Mathew shared a few examples of global brands in Dubai programming discounts based on how far you travel to see them, and  incorporating rewards for steps in other parts of the world, a programming of value can create new types of transactions and economies beyond the universe of traditional fiat currency.

Ultimately, anything that holds a form of monetary value in the real world can be tokenised and traded on a blockchain network.

Digital payments have already been the common denominator across almost all behavioral shifts post-pandemic. And in an age where most of our financial lives now exist online, the opportunities for a new token economy are virtually limitless.

A report from Boston Consulting Group (BCG) estimates that asset tokenisation will cross $16 trillion by 2030, or 10 per cent of global GDP.

At Visa, where we support the entire payments ecosystem through our diverse tokenisation technologies, we have every reason to believe that tokenisation will grow rapidly towards increasing engagement creating richer, more personalized experiences, and reducing friction to maximize conversions and drive long-term loyalty.

Our tokenisation technologies can empower banks, merchants and the wider payments ecosystem to boost authorisation, drive innovation and create new digital commerce experiences for everyone.

While it is still a long road before our markets stop using money, we are certainly on the path towards the age of value.

So, it will become quite natural that businesses and consumers trade in value, redefining the future of payments.

Leila Serhan is senior vice president and Group Country Manager for North Africa, Levant, and Pakistan, at Visa