Visa has onboarded 28 new tech partners onto its Visa Token Service platform, the company announced today. The move will enhance the security of its digital transactions and streamline the payment process.

Tokenization is a technology that replaces sensitive payment information with a unique identifier, or token, to protect underlying sensitive information. Tokenization enables consumers to save payment methods on file with certain merchants without sensitive details, like a 16-digit credit card number, being exchanged within the payment ecosystem each time the card is charged.

While still on the forefront of payment technology, the rise of tokenization is coinciding with the rise in e-commerce. According to Visa, 69% of U.S. consumers choose to store a card on file or set up recurring billing with merchants; by mid-March, online shopping in the U.S. surged 35% from 2019 levels. As a result, more merchants are tokenizing their customers’ online shopping and digital payments to limit the susceptibility to fraud. The Visa Token Service platform has processed e-commerce volumes of $1 trillion since its debut in 2014.

In fact, Visa has seen a fraud-reduction rate of 26% for digital transactions processed through Visa Token Service compared with traditional online card transactions. In the past five years, Visa has onboarded more than 150 partners to its the platform, including most recently Assist, eComCharge and WalletDoc.

For financial institutions, expanded tokenization has the potential to mitigate fraudulent transactions by driving higher payment authorization rates, said Brian Cole, Visa’s North American head of product. “By virtue of driving more tokens across the ecosystem and driving authorization rates higher, we will ultimately also reduce fraud,” he said.

Even though issuers aren’t typically liable for the fraud in many transactions where the card is not physically present — as with most online transactions — tokenization still has the potential to benefit the issuer’s relationship with the cardholder, Cole said. “The first port of call for the cardholder, if they believe that they’ve been a victim of fraud, is their issuer, their bank, and there are all sorts of expenses associated with fraud investigation,” he said.

New partners joining Visa Token Service include acquirer gateway and technology partners that connect Visa to multiple merchants using tokenization versus Visa connecting with merchants on a one-to-one basis. Since pivoting to this strategy about two years ago, Visa has been able to “work through [the gateway tech partners] to have a multiplicative effect on the number of transactions in the marketplace that are getting tokenized,” Cole said.

Tokenization also boosts authorization rates for digital payments. Authorization rates track the performance of a given payment system. For in-person transactions, more than 99% of the time the payment is transacted successfully, but with e-commerce, it’s closer to 92%, Cole said. “What we’re after with token is to close that gap.”