We have an ongoing joke at Glenbrook Partners that we just can’t stop talking about tokenization. In fact, it’s the title of one of our most popular Payments on Fire Podcasts of all time. And this year is no exception, as we continue to see significant growth in network tokenization usage, as well as some interesting new use cases.

We typically receive a wealth of information from both Visa and Mastercard in May of each year, as they both report earnings and present at the annual Bernstein Conference, which took place last month. Tokenization is an interesting niche topic that both networks tend to cover in nearly all of their earnings calls, demonstrating the importance of the technology to their respective ecosystems.  This year has been no exception.

The general themes about recent trends in tokenization from both networks have many similarities:

• The year-over-year growth of the number of network tokens issued is significant
• A substantial portion of the cards processed on each network are tokenized – and growing
• Both networks see a world where network tokens are the default credential used for processing existing use cases
• …and a key foundational technology to enable new use cases, such as those enabled by AI

Mastercard reports that 35% of all transactions are now tokenized, citing extraordinary growth in e-commerce use cases; however, this recent update did not provide the total number of tokens issued. Visa added 1 billion tokens last quarter alone, bringing its network total to 13.7 billion tokens issued. It now reports that about 50% of its global e-commerce transactions are tokenized. That’s staggering growth for a technology that has only really come to maturity over the past few years.

However, much of the most recent talk has focused on the future. And both networks now view tokenization as a core component of new services:  Tokenization is just part of the core network plumbing, and, like it or not, it will be an integral part of all types of payments innovation in the future.

There were a number of innovation highlights shared in these recent calls:

• Mastercard doubled down on its commitment to prohibit manually entered card numbers in Europe by 2030. Click2Pay and mobile wallets will transfer tokens as user credentials moving forward.

• Both networks are highly interested in the prospect of Agentic Commerce, which involves using AI-driven agents to automatically complete payments on behalf of consumers. Tokenization is a core technology to enable this. Mastercard has described its “Agent Pay” framework, and Visa is developing its “Intelligent Commerce” solutions.  (I’ll explore this a bit deeper in a moment)

• Visa is extending tokens to the blockchain with the Visa Tokenized Asset Platform (VTAP), enabling banks to tokenize fiat currencies on blockchain networks. VTAP provides a platform for banks to mint, burn, and transfer fiat-backed tokens, such as tokenized deposits and stablecoins, while experimenting with various use cases.

• Beyond payment credentials, both envision using tokenization for general consumer data, although the path forward is unclear.

But what about agentic commerce? Unless you’ve been living under a rock since the start of the year, you’d probably agree with me that it’s recently been the hottest topic in the payments community. Enough so that we’ve seen Mastercard recently hold a substantial global product briefing on the topic, opening the virtual floor up to Q&A from analysts and experts around the world.  Mastercard highlighted a few key areas related to how tokenization plays an integral role in its Agent Pay framework:

• Agent Pay will certify and register legitimate agents, which will have access to the agent-specific tokens required to complete payment transactions
• Mastercard Chief Product Officer Jan Lambert stated that he essentially describes agents as a new type of token requestor in the ecosystem
• Authenticated tokens play a critical role to ensure authenticity of the payment transaction, and will be transmitted to the merchant alongside enriched data when an agentic transaction is completed
• Token authentication can occur using other new frameworks being deployed by the network, such as network-managed Passkeys

Visa’s description of their Intelligent Commerce framework is similar to what we’ve heard from Mastercard and we expect there to be an arms race between both networks as agentic commerce scales.

Closer to home, merchants continue to refine their tokenization strategies to take advantage of the inherent benefits that have been pitched since the advent of the technology, such as better lifecycle management and higher authorization rates (in some cases).

But tokenization is still fraught with its challenges, as well. We still do not see universal support from all global card issuers, merchants experience performance inconsistencies from many issuers, and the current state often requires merchants to maintain the primary account number (PAN) to facilitate optimal processing. Global merchants often stress that optimizing token usage requires a lot of analytics, customized processing logic, and the frequent fallback to PAN on a per-issuer or per-transaction level.

There is still a lot of work to be done and a long road ahead, but one thing is certain:  we won’t stop talking about it.