Card Network Tokens: What They Are, Benefits, and Drawbacks
Blog post from Basis Theory
Card network tokens are random reference values that replace primary account numbers (PANs), with the actual card data stored in a secure token vault; unlike encrypted data, tokens have no algorithmic relationship to the PAN and cannot be decrypted into it. Major card networks including Visa, Mastercard, American Express, and Discover can issue merchant-specific tokens, while payment service providers may offer proprietary tokenization that keeps customer payment information out of merchants’ systems and can reduce compliance exposure. Potential merchant benefits include improved authorization rates and, in some regions, lower transaction costs, while limitations include initial provisioning latency, incomplete issuer and regional adoption, and complex integrations that may require additional decisioning tools. PSP-issued proprietary tokens can also tie merchants to a single provider for future transactions, whereas independent tokenization providers are presented as an option for maintaining token access across multiple PSPs. Although tokenization can reduce the risks associated with stored payment data, tokens should still be transmitted over encrypted connections as an additional security measure.
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