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What Is a Tokenized Payment?

What Is Tokenized Payment

Digital innovation has transformed how we pay for things, and new forms of payment, such as tokenized payment, have become highly used. Tokenized payments use crypto tokens to represent currency and simplify transactions.

This article explores the basics of tokenized payments, how they work, their benefits, and whether they could be a fit for your business. In essence, a tokenized payment involves using crypto tokens instead of direct currency transfers during transactions.

At the currency exchange, you can easily exchange dollars for digital tokens that can be transferred or spent online. The tokens securely hold real money in reserve. During checkout, the system sends a digital payment token instead of transmitting your actual payment details.

This has security benefits since your sensitive financial information never directly touches the merchant's systems. It also enables flexible new payment flows and integrations. Let’s continue exploring payment tokens!

What are payment tokens?

Most commonly, tokenized payments rely on stablecoins, cryptocurrencies pegged 1:1 to real fiat currencies like the US dollar or euro. The issuer backs each stablecoin with an equivalent amount of physical cash in reserves.

Cryptobunq, a crypto-friendly digital bank, issues EURK, a euro stablecoin, with each token directly representing 1 euro held securely in escrow. Cryptobunq issues each EURK token to directly represent 1 euro held securely in escrow.

During checkout, your crypto wallet would convert euros to EURK tokens under the hood. Online merchants can easily accept these tokens as a secure form of payment. You can easily buy EURK and use them for e-commerce payments, global payments, cross-border payments, and more!

The payment flow for tokenization

Here's a quick overview of how a tokenization payment flow works:

  • A consumer wishes to make a purchase online. The consumer's preferred payment provider integrates with a tokenization service.
  • Behind the scenes, the system converts their bank account or card funds into equivalent digital tokens during checkout.
  • The system sends the tokens to the merchant instead of raw payment credentials.
  • The merchant immediately receives a cryptocurrency or traditional settlement from their processor.
  • Later, when the transaction completes, the tokens are removed from circulation, and the customer receives the original funds.

As you can see, tokenization streamlines payments while keeping sensitive financial data private and secure. The benefits of tokenization vary, especially for finance companies in this aspect.

tokenized payment

Key benefits of tokenization

There are several advantages to taking payments via tokenized digital tokens:


Sensitive payment information never touches the merchant's systems, reducing the risk of data breaches. Validated, one-time-use crypto tokens are safer than stored card credentials.


Settlement can often happen in seconds instead of days, improving cash flow. Tokens move faster than traditional ACH or wire transfers.


Merchants receive immediate crypto or traditional currency, not pending pre-authorization amounts. Great for cash-flow-sensitive businesses.


Tokens like EURK enable simple, flexible digital money movement across borders without fees or complex integrations. Fast, global transactions are possible.


Tokenization helps meet strict data security standards like PCI DSS without complex certifications. Pre-validated tokens reduce compliance overhead.

To sum up, tokenization streamlines payments and innovates traditional systems to be faster, safer, and more globally accessible for businesses and consumers alike.

If you need more details about tokenization, you can check out “How does tokenization work?” “Tokens and tokenization," “Trends in tokenization," “RWA tokenization," “Real estate tokenization," and "NFT." It is a diverse subject with many features.

You can easily invest in tokenization and benefit from the opportunities of tokenization solutions with Cryptobunq. Cryptobunq is a one-stop-shop crypto service provider.

It offers a wide range of crypto services, from node as a service to custody and wallet solutions. As the future evolves more and more into the digital realm, especially with blockchain, crypto and tokens, DeFi, and more, CBQ is here to guide you!

How does tokenization work in payments?

Let's explore a concrete example to illustrate the tokenization process in action:

  • Imagine a UK consumer shopping at an online retailer in Spain. Cryptobunq, a EURK-issuing crypto-aware financial institution, integrates with their bank at checkout.
  • During crypto payment, the system automatically converts euros from their bank account into equivalent EURK tokens in real-time.
  • Instead of sending payment details, the Spanish retailer receives the EURK tokens.
  • The retailer receives an immediate euro settlement from their gateway, which has a relationship with Cryptobunq.
  • After delivery, we remove the tokens from circulation and safely return the original euros to the UK bank account.

The whole process happens seamlessly behind the scenes. Tokenization eliminates cross-border currency conversion and compliance headaches.

What is an example of payment tokenization?

One real-world tokenized payment network gaining momentum is Visa Token Service. It tokenizes sensitive card details during online transactions, replacing them with a unique digital ID token.

Visa works with tokenized payments technology partner Token, using their global payment rails and issuing tokens on behalf of financial institutions. During online checkouts with participating merchants, customers submit the token instead of raw card data.

It then routes transactions via the token numbers, while the underlying personal account information remains safely encrypted. This has helped thousands of merchants improve data security by replacing card numbers with unique digital identifiers during online checkout.

As it is clear, this example of payment tokenization simplifies commerce for all involved parties while strengthening data security compared to traditional card-not-present transactions.

What is a token payment plan?

Tokenization also enables novel "pay later" token payment plans for purchases. The consumer's selected payment tokens are split across multiple transactions instead of paying in dollars upfront.

For example, a merchant may offer to break a $1000 purchase into four $250 installments using EURK tokens. The merchant will receive the tokens in scheduled allotments over several months after the purchase.

This gives buyers flexibility while still providing merchants with assured upfront fund access. It's a win-win that tokenized digital payments help make it possible.

How does a token payment plan work?

Here's a quick overview of how a token payment plan could work:

  • A consumer chooses to pay for a large purchase over 4 months via scheduled EURK token allotments.
  • An authorized source distributes the full €1000 worth of EURK to the merchant upfront at checkout.
  • Every 30 days thereafter, the closing source (e.g., a bank) removes €250 worth of the original tokens from the merchant's wallet and "pays it back".
  • Since the consumer prepaid the tokens at purchase time via their bank account, they are not charged again.
  • Both merchants and consumers benefit from the flexibility and assured payments of this tokenized installment process.
  • By splitting real currency into scheduled digital token installments, novel financing models become much simpler with tokenized payment networks.

tokenized art

Is payment tokenization right for my business?

Tokenization offers cost and risk reduction benefits that could suit many businesses, but it's not right for all.

Some key factors to consider include:

Business type

Industries like ecommerce, travel/accommodation, and recurring billing are ideal as they often require seamless cross-border payments.

Transaction volumes

Higher volumes make the setup cost more justifiable from an ROI perspective. Tokenization really shines at scale.

Compliance needs

Stricter regulatory environments or frequent audits indicate tokenization could simplify meeting compliance burdens long-term.

Infrastructure maturity

Legacy payment systems may require an overhaul to integrate tokenized solutions smoothly and without disruption.

Growth plans

If international expansion is on the horizon, tokenization preempts barriers and makes global scale up much easier down the line.

Any business moving significant funds internationally or handling large transaction volumes should evaluate tokenized networks. The time savings, security boosts, and future-proofing are compelling for many operations.

Which types of businesses need to use tokenization for payments?

A few industries that particularly stand to gain include:


High volumes and the desire for fast global settlement make tokenization a no-brainer.


Recurring reservation payments benefit greatly from tokenized flexibility and compliance.


Innovation in this space relies heavily on tokenized rails to enable novel business models.


Cross-border fund movement and regulatory complexity are big challenges that tokenization elegantly solves.


Traditional money transfer friction dwarfs in comparison to tokenization's speed and ease of use.

Subscription services

Recurring billing complexity disappears with tokenized microtransactions in the background.

Most any business moving significant money globally on a large scale is a strong fit. Industries making tokenized integration a strategic priority gain major competitive advantages.

The bottom line

New digital payment methods rely on tokenizing currencies to enable fast, global microtransactions through distributed ledgers. Tokenized payments represent the future of finance by streamlining transactions through digital tokens.

Early adopters of technology like Cryptobunq are driving innovation, and tokenized networks have real benefits for both consumers and businesses in many high-growth verticals worldwide. If you want to adapt tokenization services to your business today with CBQ, contact us!

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