The Signal: Token Takeover, The Rise of Network Tokens with G+D, NMI and Mastercard | Episode 447 

Welcome to the Signal, powered by the Leaders in Payments podcast, where we are cutting through the noise to reveal what truly matters in payments and fintech.

Greg Myers: Hello everyone, and welcome to the Leaders in Payments podcast. I’m your host, Greg Myers. And today’s special guests are Mark Van Horn, the Digital Solution Lead, North America at G+D. Tiffany Johnson, the Chief Product Officer at NMI, and Ryan Francis, Vice President, Digital Product at Mastercard. So, Mark, Tiffany, and Ryan, thank you all for being here and welcome to the show.

Tiffany Johnson: Thanks for having us.

Mark Van Horn: Happy to be here.

Greg Myers: So, this episode is part of our Signal series, where we’re cutting through the noise to reveal what truly matters in payments and fintech. Network tokens aren’t just about replacing PANS; they’re about unlocking value across the payments ecosystem. So, for software companies and ISVs, they can provide tremendous value, and we’re going to unpack just that in this episode. So, Mark, before we dive into the meat of the conversation, can you walk us through your professional journey, tell us a little bit about what G+D does, especially as it relates to network tokenization?

Mark Van Horn: Sure, yeah. My payment journey started probably in the late 90s. I worked for a company that had a transaction tracking program for not-for-profit organizations, which eventually led me to where I am today. For the past four years, I’ve been leading the digital growth and enablement for G+D here in North America. G+D has done a great job over the 170 years of its existence, being a quiet player in the background, but we do everything from SIM chips to creating currency to being the third largest producer of debit and credit cards in the world. 

So, my team sits on the digital software that surrounds the use of those cards, and that includes network tokenization. So for card on file, we help aggregate the services from Mastercard and the other networks to provide a single implementation for our customers to utilize network tokens.

Greg Myers: Okay, Tiffany, same question for you. Can you walk us through your professional journey and tell us a little about NMI and especially as it relates to network tokenization?

Tiffany Johnson: Of course. So, as you said, I am the Chief Product Officer for NMI. I’ve been here about two and a half years, but I’ve been in payments for going on 20 years and the whole journey. My primary focus has been on embedded platform payments. And I’d say throughout my career I’ve had the privilege of working with incredible customers and companies, everyone from Apple and Uber to Intuit, Amazon, and even at one point I helped embed payments into Formula One. So I have a lot of experience in embedded payment strategies and payment platforms. 

And then a bit about NMI. NMI is a global payments platform. We serve about 4,000 channel partners. So payfacs, ISOs, banks, ISVs, platforms and through those channel partners, they provide payment services to over a million small and medium-sized businesses and in some cases enterprise businesses as well that are using our platform, process payments as they sell their goods and services. So, our mission at NMI is to deliver that full-service payment acceptance platform for our partners. And it’s fully white labeled, so you may not have heard of us, but you’ve probably processed transactions through us. And as part of that vision, we think network tokens are critical to the acceptance journey because of the lift it creates and approvals, friction, everything that’s important to that payments journey. And obviously, we’ll be diving in today, so thanks for having me.

Greg Myers: Absolutely. So, Ryan, your turn. Same question for you. Can you walk us through your professional journey, tell us a little bit about what Mastercard does, especially as it relates to network tokenization?

Ryan Francis: Thanks, Greg. It’s great, great to be here. So, yeah, I, basically the vice president of digital product for North America at Mastercard, have over 22 years of payments experience predominantly on acceptance and supporting acquirers and payment service providers. But my focus right now is really on building the next generation of digital commerce experiences. So, my team is really focused on making sure that payments here remain seamless, secure and intelligent. 

From a Mastercard point of view, we’ve obviously very much led the way in terms of network tokenization. And really, since their inception over ten years ago now, we’ve continued to evolve the capabilities of digital tokens. And so, continuing the work that I’ve done over those years, really in terms of working with our acceptance partners and issuing partners to scale our tokenization footprint. You know, we’ve got to a point really where more than 30% now of Mastercard transactions globally are using MDES and tokenized rails. And that’s even greater. I mean, in North America, it’s around 50% now. So, you know, tokenization has really been the foundation of a lot of the innovation and digital use cases that we’ve come to see and come to fruition in recent years.

Greg Myers: Okay, great. So, let’s dive into the topic for today’s conversation. Obviously, network tokenization. So, Mark, let’s start with you. Can you define general tokenization and then tell us maybe what the difference is between general tokenization and network tokenization?

Mark Van Horn: Very simply put, turn about the clock to the early days of online transactions and the Internet and e-commerce and merchants started storing PANS and payment credentials for their customers, for repeat customers. This was obviously highly susceptible to fraud and breaches, and things of that nature. So, some smart people came up with tokenization, and this is basically the idea of taking sensitive information and turning it into a non-sensitive equivalent. Right? So, this, this token is useless outside the realm of working with that merchant. So, if you steal a token, you can’t really use it anywhere. 

This has really helped protect merchants from having a lower susceptibility to fraud. But as it has evolved that it’s become necessary, and Ryan and his team, and his equivalents have realized that there’s a real role there for networks to participate in this. So, the first iteration did a great job of getting the responsibility out of the merchant, but that responsibility then fell on companies like NMI to protect that data. In the newest version, we have the actual tokens being generated by the networks. So, Visa, Mastercard, Amex, Discover here in the U.S. primarily, they in turn also have to be approved by the issuing bank. So those tokens have a further and greater degree of approval and tied identity to those credentials for that specific merchant. So yeah, it’s been a pretty great evolution. 

Greg Myers: Okay. Well, Ryan, I’d love to get your perspective on network tokenization, especially kind of as it relates to the broader industry landscape and kind of what’s going on in that world today.

Ryan Francis: Yeah, thanks, Greg. I think from my vantage point, what’s really compelling about network tokenization is how it’s really shifted from being a security control to a broader strategic growth enabler for the entire payments ecosystem. So, I mean, if you take where we are today, network tokenization is really becoming table stakes. Merchants using network tokens are typically seeing anywhere in the region of between 3 to 6 percentage points of authorization uplift. And that’s really a meaningful difference. Right? Especially when you think about the hundreds of millions of transactions that are being processed each day. And that’s really not just because tokenization is just swapping out a card number. Right. Some very critical trends and capabilities around network tokenization that are driving that adoption and that capability. 

So, I think there are three that I can think of, really, around lifecycle management being a big part of network tokenization. Tokens obviously automatically update when a card is reissued or credentials change, which really helps cut down on unnecessary declines and leads to a better consumer experience overall. And I think obviously with the help of partners like NMI and G+D, we’ve really got to a point of interoperability and scale. 

Tokenization is no longer really just scaled into one wallet or one merchant. There’s really a collaboration across networks, issuers, gateways, merchants, and everyone’s really working together now in terms of being able to use those capabilities. And that’s really important, especially as we’re now entering a world where you know, payments become more embedded, more intelligent. And you know, we’re getting to a point, I guess, where things like agents are starting to act on behalf of consumers and merchants. Right. 

So, tokens really do provide the ability for merchants and issuers to make sure that they gain insights and trust as part of the built-in capability of the token itself. So yeah, I think as an industry we’ve really been raising the bar on what tokens can do, and it’s not really just about processing transactions, but really help, helping drive, drive business outcomes. So higher conversion, stronger retention, less fraud, and eventually becoming, you know, invisible infrastructure for commerce as a whole.

Greg Myers: Okay, I think that’s a great segue into the next question, which I really want to be a group discussion. So, Mark, I’m going to point the question at you, but Tiffany, Ryan, please jump in. And what we’re going to do is kind of break down the value of tokenization into five areas. So, let’s walk through each of those and have you give us your thoughts. So, the first one is a higher auth rate. So Mark, thoughts on that one?

Mark Van Horn: I think by its nature, a network token provides a greater degree of certainty from all the players participating in the transaction. This is a credential that has been predesignated by the issuer as an authentic token, and therefore, when it is submitted for a transaction and is tied to a specific merchant using a certain domain, right. You can’t use that network token if it’s an e-commerce token to then do some type of point of sale or something along those lines.

So, you’re creating a scenario where everyone who’s participating has seen this before, recognizes it, understands the format that is being used, and therefore creates a higher level of authorization rates. Ryan mentioned some of those rates, and those are pretty significant already. We have some single-use cases with certain specific merchants that are even dramatically higher than that authorization rate. So, it’s a path. But which of these network tokens really provides a real advantage over just using regular payment credentials?

Tiffany Johnson: I would agree with that because of those benefits, and Mastercard, Visa, JP Morgan, there are a lot of studies out there where people quote, you know, a 3 to 4% uplift in authorization on top of a meaningful reduction in online fraud. But I will say within our NMI portfolio with the partners that have enabled network tokenization, we’re seeing anywhere from a 4 to a 40% uplift and approval rates, depending on the MCC, the scenario, and the transaction type. I would say that in our own portfolio, we’re actually seeing even more positive results than some of the industry publications are quoting.

Greg Myers: Okay, so the next value that tokenization brings is optimized interchange rates. So, Mark, can you start the conversation there?

Mark Van Horn: Sure, I mean, so the easy thing on the surface, is that some of the networks are actually providing a discounted interchange rate for using a network token versus a credential that is not a network token. So that’s right off the top is the easiest thing to point to. But there is also create an opportunity here for payment orchestrators or optimizers and this can be, it’s a standalone company, or it can be a service provided by a company like NMI that provides merchants that ability to sort of leverage the token to make sure that they are getting the best possible interchange rate at that moment in time for that transaction, for that consumer, and leveraging that information correctly. So that’s, that’s, that’s what we’re seeing on our end.

Greg Myers: And Ryan, I don’t know, being that you’re, you’re one of those companies that decides some of those interchange rates, if you have any thoughts there.

Ryan Francis: Yeah, I mean, I guess when, you know, when authorizations improve and declines drop, interchange dynamics and processing efficiency improve too. Right. So, fewer costs from lost revenue and declines in, you know, having to reprocess transactions. So, I think it’s an important capability.

Greg Myers: Yeah, I think the next one is kind of a big one because, you know, I continue to hear in conversations that I have around fraud and chargebacks, obviously part of that, but I think the fraud, the fraudsters are getting smarter and better every day. And if this is a way that can help with that, I think that’s huge. So, Mark, any initial thoughts on that one?

Mark Van Horn: I think we’ve touched on this a little bit already, but going back to the certainty of understanding who this person is and where that credential came from is a very, very big factor here. Mentioned earlier that if this cred is somehow stolen or compromised, the utilization of that token can’t really be used anywhere. Right. You can’t take a token from merchant ABC and try to use it at merchant XYZ. It’s not going to work. As some of these services continue to evolve, we’re going to start seeing more and more of a device-bound token. Right. So if this token is used on my PC, it can’t be used on a fraudster’s phone.

So, this is further enabling that. Whereas if they just had my simple payment credentials or even potentially a non-network token, those capabilities might allow more fraud to happen. I think part of chargebacks is also something that’s maybe a little bit more of a psychological element for consumers. Lifecycle management plays into this. If a merchant has an up-to-date credential for me as a consumer, they don’t miss a payment, they don’t miss a month, or I don’t miss a payment on a monthly recurring transaction, preventing the change where three months from now they finally get an updated credential. And now I have a large transaction coming through from this recurring subscription. My challenge as a chargeback as a consumer because I didn’t notice that the past two months weren’t even charged to me. Right. 

So, I think this is fraudulent on behalf of the merchant. I’m challenging it as a chargeback, and basically, it’s creating a whole lot of work for a whole lot of people that’s not necessary, where if you have that current credential all the time, I’m a customer seeing that $15 a month charge. So it doesn’t throw me off when they’re all at $65 because there have been multiple months being charged at the same time. So that’s some of the simple applications of it, I think.

Tiffany Johnson: Yeah. And I think from an issuer perspective, when they see a transaction that comes through that has a 3DS cryptogram or a network token cryptogram, they know more about it. They know that that card was tied to a device like Mark talked about, and they’re less likely. I mean, issuers have auto chargeback rules; they take a look at some of these transaction types with additional detail, and they’ll be more discerning about what goes through that auto chargeback rules process, and that has ripple effects. 

And just a story about one of our customers at NMI who uses network tokens. They are a partner, they specialize in subscription services, and they work with merchants ranging from very high-end exclusive restaurants to yacht clubs to alumni student groups to men’s clothing like they’re, like they’re across the board in terms of the direct-to-consumer merchants that are using their subscription services. And since working with NMI and implementing our products called Customer Token Vault, which joins our gateway token and our network token together, this partner of ours has seen a 28% increase in approval rates, and their blended interchange cost across the networks is saving about 7 to 8 basis points. And they’re seeing a reduction in fraud and chargebacks that are coming across. So, it’s just, it kind of hits the core benefits in this use case and especially in this environment where we see an uptick in AI fraud.

 AI is growing all around us, and we’ve seen an uptick in restrictions, things like the Visa Vamp program, that are creating higher thresholds for what we have to hit in terms of dispute rates and fraud rates. Network tokens are a really important tool for merchants to have in their belt to be able to get ahead of those constraints.

Ryan Francis: Yeah, I agree, Tiffany. Mark, you touched on great points there. And you both make the point that the tokens are essentially cryptographically tied, right? To either a device or they have a lot more context to them as well. Right. So, for an issuer, you know, the aspects of the token are the data elements that obviously flow to them. Right. So, they get a lot more context on the transaction be, ah, being tied to a specific merchant or even in the case of AI that you’re referencing there to. Tiffany, you know, we’re kind of moving to being able to explain to the issuer who the agent was involved in this transaction. Right. 

So I think tokenization really does provide not just a security around the credential itself, but the context of the transaction, which I think is really important, especially when you’re combining that with authentication and authentication tools, so being able to tie that credential with someone’s identity that’s a really major reduction in risk for an issuer.

Greg Myers: Okay, and the next one, and I think Mark, you and Tiffany kind of mentioned this a little bit, but the recurring payments space, so making those payments smoother and easier. So, Mark, you want to talk to that for a minute?

Mark Van Horn: I think we all probably have experienced this a little bit recently, but he turned back the clock a decade ago. We all received a couple of emails a month asking us to update our credentials, right? For any type of subscription service we had or even just an online merchant that we use with any frequency, and those have, they’re not, they don’t exist at all anymore. But the frequency with which we receive them is very minimal. So, what is happening is we’re getting these automatic lifecycle management notifications for our credentials. 

So, if my card is just expired or lost or stolen, whatever the case might be, I, as a consumer, no longer need to go into each one of my subscription services, which is growing every year, by the way, of the number of subscriptions that we all have to update my credentials. So, for a couple of scenarios, right. So that used to be a path by which people ended their subscriptions, right? I’m not going to give that company my new expiration date. Therefore, my subscription will ultimately end. So, this is for a merchant who sits there and says, “Well, we’re not going to lose retention,” which I know is a big part of their business models simply because we don’t have an updated credential. 

Also, in the past, merchants were facing somewhere between, depending on which statistics you read, they were from $20 to $70 in cost just to get an updated credential for a customer. So, this is something that’s happening automatically. They don’t notice that it happens as far as the merchant is concerned, and it’s business as usual. So, I think this is really, from my perspective, a place where network tokens really shine because this is something that was a true pain point before that is sort of disappearing day by day.

Ryan Francis: Yeah, I think you’re right there, Mark. You know, I’ve certainly noticed this when I’m talking to Match. It’s about enabling network tokens that I always kind of look at it from the perspective of the consumer and the user experience that they get in a result of a declined transaction, you know, a decline transaction that didn’t necessarily have to happen because there are updated credentials available, if that, if they were using tokenization. So, you know, and whilst there’s obviously always the opportunity for that consumer to enter another credential or another payment method, it did result in a bad experience. Right. For that consumer. So that consumer then has the optionality, and they know they’ve had that bad experience, and maybe they go elsewhere. So, I think removing those friction points is a really great benefit to network tokenization.

Greg Myers: And then the last one that we’re going to touch on, kind of the value of network tokenization, and Mark mentioned it a little bit already, is the stronger customer retention, being able to keep those customers longer. So, Mark, any other thoughts on that one?

Mark Van Horn: No, it’s reiterating, I think, what everyone’s been saying. I mean, it’s a better experience, right? I don’t have complications. I may be trying to run a transaction, and I’m running out the door to go pick my daughter field hockey or something along those lines. And I don’t have time to enter new payment credentials. I don’t have time to update something. And whether that is just an inconvenience for me or a lost transaction for the merchant because I never remember to go back to do that, or it’s just simpler to get that same product from another merchant who isn’t going to have that hurdle there for me, because it’s entered my credentials more recently. 

You know, in this scenario, Lifecycle management, higher authorization rates, which we’ve all been mentioning, which is just a cleaner, faster, more convenient experience. I’m going to enjoy my experience, and I’m more likely to come back and spend more money with that same merchant. So I think it’s a culmination of all the different points we’ve been talking about to this point.

Tiffany Johnson: Agree. And you know, the subscription economy is massive and it’s growing. And I read a stat a few months ago from payments.com that said a third of subscription consumers. When a merchant churns subscription consumers, a third of it’s because of payment interruption issues. Because like Mark said, if you’re sitting on the couch on a Friday night and your Hulu account doesn’t renew, you just go to Netflix, right? It’s so convenient. 

There’s so much competition out there. You just go to where your payment is, is adopted. And talking about that kind of, that evolution of, you know, a decade ago, you used to have to go in and remember every time you reported your credit or debit card less stolen, you had to remember all the places it was on, file and go in and re-key it. And then the next evolution was this account updater concept, which was great and novel, and it was automatic, but it was all in batch. You know, the issuer would maybe take a couple of weeks or a couple of months to update the new card credentials to the network. And then the merchant would take a couple of weeks or a couple of months to update the credentials on file. 

It was a great evolution, but that all gets completely, in real time now with Lifecycle Management, where when you go to your bank and say my card’s been last stolen. Netflix now has your card credential within minutes because of that lifecycle management update which in a world where the subscription economy a third of their business is walking out the door because of payment interruption, this life cycle management, I think it will be really, really helpful. And of course, that’s on top of the higher approval of your declines, the better chargebacks. But that uninterrupted recurring billing, I think, is really key to the value prop and the customer retention here.

Greg Myers: Okay, so Tiffany, I’m going to stick with you for this next question. What do you think the future of tokenization looks like?

Tiffany Johnson: So I have three predictions for network tokens. First, I think it becomes the default for card not present because of lifecycle updates and the value, I think it becomes even more pervasive. I think secondly, the idea of tokenization will move beyond cards. We’ll start to see it more in open banking, the account-to-account, and other alternative payment methods. And then thirdly, with the world of AI exploding around us, I think tokens will be leveraged to predict declines, do low-cost routing, and fight fraud. So, I think especially in the world of agents and commerce, you know, at its core, I think tokenization is just at the beginning.

Greg Myers: Okay, Ryan, any thoughts?

Ryan Francis: Yeah, absolutely. I guess I’ll follow on from that theme that Tiffany raised around agentic commerce. I think that really is the next frontier for tokens. I think we’re already in a world where we’re seeing over half of U.S. consumers moving from traditional search engines to leverage gen AI to support their shopping needs. So, I think that tokens are obviously going to be key here, right? You know, where you know, agents are acting on behalf of consumers and businesses to execute transactions, they’re going to need to be secure, right? 

They’re going to need to be trusted. You know, really in a world where you can imagine your own sort of assistant, your own digital assistant, maybe booking your travel, or you know, paying a bill or renewing a license for you. There’s a real kind of boundaries that you have to define to ensure that there’s trust in the ecosystem in those user experiences. And I think that’s really where tokenization becomes critical. Obviously, as we’ve been talking about, it takes the sensitive account information and makes sure that it can be used safely across any device, any channel, any ecosystem. And that’s really where tokens have become the foundation for agentic commerce. 

And you know, when you’re combining that with things like you know, agent registration or biometric authentication and those kinds of conversational interfaces that come with gen AI. That’s really where I think we’ll see the power of this capability come to life, you know. And I think Mastercard’s role is going to be really important in that, in terms of making sure that where the world is becoming more autonomous, you know, trust has to travel with every transaction there as well. So, you know, whether that’s initiated by a person or a device or an agent, tokenization has really laid the rails for this next wave of commerce.

Greg Myers: Okay, Mark, any thoughts on the future?

Mark Van Horn: Both Tiffany and Ryan covered that very, very thoroughly. I think the only addition I would have is I think we have this other great additional tool of passkeys, and I think you’ll start seeing more examples of tokens and passkeys being used together. Whether that, once again about using asynchronous or synchronous devices. Right. So, depending on what kind of merchant or how much you’re using most cases, to really kind of further leverage the knowledge that this person is who they say they are. And I think you’ll start seeing more combinations of those. I think super long term, you’re going to start seeing like ID tokens. Right. 

And that will also probably be something that is combined with the use of the network token because you’re leveraging once again who this person is, the authority or mandate that they give in an agentic AI transaction to actually provide payment in this scenario. And those are all going to get tied together and kind of have a central sort of meeting point, I believe, but otherwise covered very thoroughly.

Greg Myers: Okay, great. So, Tiffany, can you tell us a little bit about the relationship between G+D and NMI?

Tiffany Johnson: So Mark mentioned in his intro, G+D is a longtime leader in tokenization and digital payment enablement. So, they specialize in everything from token provisioning, lifecycle management, digital assurances like passkeys, like you just mentioned, and ah, there’s a lot of subject matter expertise that comes with that. And then at NMI, we have built all of those network token benefits we’ve talked about. The, you know, lower fraud rates and less friction in the lifecycle management. 

We make network tokens available to our channel, our ecosystem of partnerships, without additional integrations or development. So I would say together G+D and NMI, and we really complement each other, and we help our network adopt tokens very quickly, securely at enterprise scale, with just a simple configuration, because we’ve done the heavy lifting that all taps into the great network work that Mastercard and the other networks have done from a token service perspective.

Greg Myers: Okay, great. So, one last question for the three of you and Ryan, I’m going to start with you. What is the one takeaway you’d like the listeners to come away with from this conversation when it comes to network tokenization?

Ryan Francis: Yeah, I think from my perspective, it’s just kind of understanding that network tokenization isn’t really just a security upgrade, it’s the foundation for really the next generation of digital commerce tokens. Really enable safer, smoother, smarter interactions. And so when you layer that with new technologies or capabilities like agentic commerce, payments become so seamless because they use these tokens. Right. They recede into the background, and merchants and consumers can then focus on the value that they’re getting from these transactions versus, you know, any friction that might be there. So yeah, that’s my main takeaway, and you know, proud to be, you know, leading that transformation and very excited about what comes next.

Greg Myers: Okay, so Tiffany, over to you. What’s the, what’s the one takeaway you want the listeners to come away with from this show?

Tiffany Johnson: At the end of the day, they’re not just a back office function. It’s a critical part of the customer experience. And network tokens, it might seem scary and complicated, and cryptograms and don’t be afraid or intimidated. You have great partners to lean on, like G+D and NMI and Mastercard, that have done a lot of heavy lifting to make it seamless for our partners and our merchants. So don’t be intimidated and just realize the network tokens are. It’s not just a security feature; it’s a business lever.

Greg Myers: Okay, Mark your thoughts.

Mark Van Horn: Yeah, again, Ryan, Tiffany, that covered most of the bases there. I think the only thing I would say is that tokenization has been in existence for 20 plus years. Right. Network tokens for the past 10 years. Adoption is happening very rapidly right now. It’s not a finished product. I don’t know that it ever will be. Right. So, I think it’s a foundational layer, like Ryan was mentioning that that can be built upon, where there’ll be more and greater features and more ways to utilize it. 

So, participating in it and getting it as part of your operating system makes you prepared for the next great feature that will be used to use network tokens that might include other types of express payment options and things of that nature. So it’s something that’s important for merchants and processors to get on board with, because it’s going to be sort of what the future is built upon.

Greg Myers: Okay. I think that’s a great way to wrap up the show. So, Mark, Tiffany, and Ryan, thank you so much for being on the show today. I know your time is very valuable, so I really appreciate you being here.

Ryan Francis: Thanks, Greg.

Mark Van Horn: Thanks for having us. Great conversation.

Tiffany Johnson: Thank you. Good to see everybody again.

Greg Myers: And to all you listeners out there, I thank you for your time as well. And until the next story.