As e-commerce continues to expand – projected to reach $6.8 trillion in global sales by 2028 – consumers are demanding faster, safer and more seamless checkout experiences.
Can tokenization transform e-commerce
Yet, cart abandonment remains a persistent challenge, with 70% of online shoppers discarding their purchases mid-checkout, according to the Baymard Institute.
Tokenization has emerged as a critical solution to address this challenge.
By enhancing security, reducing friction and improving trust, tokenized payments are set to revolutionise e-commerce in 2025 and beyond.
A Shifting E-Commerce Landscape
The reasons behind cart abandonment vary, but the payment experience is a decisive factor.
Studies show that over half of consumers abandon purchases if their preferred payment option isn’t available, and 25% avoid checkouts they perceive as insecure.
Key reasons for abandonment include:
- 54% abandon when their preferred payment option is unavailable
- 25% lack trust in sharing card information
- 22% find checkout processes too lengthy
- 13% want more payment method options
Addressing these concerns requires merchants to balance three key elements: context, control and convenience.
“It’s about more than just providing the right payment method,” explains Alexa von Bismarck, President EMEA at Adyen. “It’s about ensuring a secure and seamless checkout process.”
Merchants unable to meet these expectations risk losing sales. As von Bismarck highlights, “When payments don’t align with consumer expectations, it’s money left on the table.”
Tokenization provides a clear path for merchants to align with evolving consumer demands.
Enhanced Security with Tokenization
E-commerce fraud is expected to surge from $44 billion in 2024 to $107 billion by 2029, according to Juniper Research.
Consumers are increasingly aware of these risks and hesitate to share card details online, especially with merchants they perceive as vulnerable to breaches.
Tokenization eliminates these concerns by replacing sensitive card information with encrypted tokens. These tokens are meaningless to cybercriminals, reducing the risk of fraud and data breaches.
Mastercard is spearheading the shift, targeting 100% tokenization in Europe by 2030.
Mark Barnett, President of Mastercard Europe, emphasises its importance: “A tokenized ecosystem removes real card numbers from the internet, creating a safer payment environment.”
Tokenization also offers resilience against data breaches.
Unlike traditional card-on-file models, tokenized systems ensure merchants never store actual card numbers, limiting the exposure of customer data in the event of a breach.
Efficiency Without Compromising Security
Security measures often introduce friction, but tokenization strikes a balance by streamlining the checkout process.
“In a tokenized world, a customer can simply enter their email, authenticate securely, and pay instantly with stored details,” says von Bismarck.
This approach not only enhances convenience but also reduces checkout times, addressing a major cause of cart abandonment.
Additionally, tokenization simplifies card management for consumers.
Lost or expired cards no longer disrupt recurring payments, as tokens automatically update across subscriptions.
Barnett explains: “Consumers can easily track and manage where their cards are stored, making the experience more transparent and user-friendly.”
Driving Merchant Adoption
Despite its benefits, some merchants hesitate to adopt tokenization, often due to concerns about cost and complexity.
Von Bismarck believes education is key: “Merchants need to see that tokenization not only enhances security but also increases transaction approvals and reduces declines.”
Barnett agrees, noting, “Higher approval rates are the holy grail for online merchants. As the benefits of tokenization become more apparent, adoption will accelerate.”
Looking Ahead: Tokenization in 2025
By the end of 2025, tokenized payments are expected to dominate online transactions.
Momentum is already building, driven by advancements in technology and growing awareness among merchants and consumers.
“This year marked a turning point,” says von Bismarck. “Tokenization is no longer just a tool – it’s becoming the standard for secure, efficient e-commerce.”
With its ability to enhance security, improve convenience and build trust, tokenization is poised to reshape the future of online shopping, offering consumers and merchants a better way to transact.
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