Tokenization Will Make One-Click Payments Explode by 2026

• Tokenization is revolutionizing one-click payments, providing secure, frictionless transactions, and reducing compliance burdens for merchants.
• Network tokens outperform traditional tokens, offering adaptability, fraud reduction, and uninterrupted transactions even with expired cards.
• Biometrics and digital wallets are merging with tokenization, paving the way for seamless, secure, and personalized payment experiences across devices.

In a world that’s been reshaped by an e-commerce explosion, one-click payments are taking off.

In fact, customers love one-click payments so much that the global number of tokenized payment transactions is set to pass the 1 trillion milestone  by 2026.

However, the frustration of repeatedly entering and remembering payment details across different e-commerce sites is universal across all consumer groups.

It’s fiddly, time-consuming, and prone to human errors, which can cause transactions to fail, often resulting in the customer abandoning the purchase.

While merchants can store customers’ sensitive data with card-on-file capabilities without tokenizing it, they must then ensure compliance with PCI DSS.

This can be a financial and logistical nightmare – especially for an enterprise merchant with multiple sites in several jurisdictions.

Untokenized stored payment details can’t magically update themselves when the customer’s payment card expires and a new one is issued, meaning the customer and the merchant must go through the process all over again.

It’s no wonder that merchants are urgently seeking better alternatives.

The Technology Making One-Click Payments Possible

Tokens are an encrypted version of a payment card. Tokenization replaces the actual card number (PAN) with a randomized sequence that can’t be decrypted by hackers.

This sequence is stored in a secure digital vault and is used in the form of a token, whenever a customer uses that particular payment card with the merchant. Tokens also help convert more transactions since they support better authorizations.

While customers’ love for the convenience of one-click payments is clear, the benefits of tokenization extend far beyond ease of use. It allows merchants to store the tokens instead of the customers’ readable payment data or, better still, store the tokens in a partner’s secure vault.

By taking this approach, they reduce their PCI DSS compliance burden, and their customers’ card details won’t be compromised in the events of a data breach.

That’s because tokenisation encrypts the card data where the merchant has it stored – whether that’s in their own vault or in a third-party vault.

Payment tokens can be stored on a device in the same way as a website cookie, creating a digital fingerprint that can use that token.

But there’s more than one type of token, and each has its own limitations.

Multiple Tokens

Payment or gateway tokens, for instance, are typically proprietary and siloed within different platforms. This means they’re not interoperable outside of their own ‘walled garden.’

In turn, this restricts their use and leaves merchants tied in to certain processing partners and transaction flows.

The data from payment and gateway tokens gives merchants limited visibility over who their customers are, how they like to pay, and what they like to buy. They can also limit a merchant’s ability and agility to adapt their paytech stack.

To use a slightly primitive analogy, traditional tokens are like Arnold Schwarzenegger’s Terminator T-800 model: functional and designed for a specific purpose, service, or touchpoint.

They’re rigid and inflexible and cannot easily move or adapt, so sometimes, the customer’s transaction has to proceed without them.

Just as the payment industry has made great strides in removing friction from payment processes, we need to ensure that tokenization is made as simple and as interoperable as possible.

Network Tokens the Way Forward for Effortless Commerce

In contrast, network tokenization replaces the customer’s primary account number with a unique EMV token issued by the card scheme. This means it can be used across channels, gateways, and even different merchants.

By using network tokens instead of proprietary merchant or gateway tokens, card details are protected throughout the payment chain whilst also offering advantages such as lower processing fees and auto-updater capability.

To wrap up the crude analogies, network tokens are like Robert Patrick’s Terminator T-1000 liquid metal model: fluid, flexible, adaptable to changing demands, and able to follow the transaction through different stages of its journey.

The benefits of network tokenization are obvious for merchants and their payment providers.

First, it reduces fraud risk in payment workflows and aids compliance with PCI standards. Across the payments industry, network tokenization has been shown to reduce the average fraud rate  by an astonishing 26% without creating any additional friction for consumers.

That’s a win-win right there.

But there’s more. Network tokens can also protect consumers from expired PANs. If the customer’s original card expires, the token will continue uninterrupted because the underlying token is automatically updated via the card issuer.

This eliminates the headache for customers who have to re-enter their new card details once their card expires and supports elevated pass rates.

New Digital Payment Initiatives Implemented

Transactions that use network tokenization also attract preferential transaction fees, making them more attractive from both a cost and authorization point of view.

Essentially, network tokenization can reduce the likelihood of payment failing at checkout by removing traditional card-on-file barriers and removing irritant layers from expired cards.

This elevates higher authorization rates, typically from 3% to 13% , depending on the region .

It doesn’t sound much, but it can mean millions more in revenue for an enterprise merchant in thin profit margin or high-volume sectors like travel, gaming, and digital goods.

We’re seeing scheme initiatives like ‘Click to Pay’ being embedded into a range of merchant verticals, enabling not just tokenization and one-click payments but also cardholder auto-enrolment.

Passkeys are also becoming more widely used. They allow on-device biometric authentication and remove the need for passwords and one-time passcodes.

The combination of customer whitelisting based on digital device ID and other digital fingerprint data, card tokenization, and biometric authentication is powering the lowest-friction one-click payment experiences we can see right now.

This is particularly true on mobile devices, where all these elements can reside in one place.

Role of Payment Providers in Supporting Merchants

What we know for sure is that payment flows will get more complex, fraud will shapeshift and mutate, and customers will quickly take their money elsewhere if their payment experiences are too slow and gnarly to complete.

That’s why more merchants and payment providers are adopting tokenization to slash fraud and false declines, curate a great customer experience, and accelerate their own business growth.

Even as tokenization itself broadens into new types of tokens, merchants will need more guidance and support to understand, adopt, and implement it for maximum effect.

But what about the future? I’m confident that we’ll see digital wallets combining with tokenization and biometric ID to enable everyone to prove who they are, no matter what service they’re interacting with.

For now, we’re proud to be a part of a wave of payment technology that’s meeting consumer demand for frictionless payment experiences.