Thanks to blockchain technology, tokens are back in the spotlight. They offer a smart and secure way to store personal and payment data separately. But what exactly is a token? And how can you already use them today?
Tokens allow you to work with sensitive data without having to send or store that data directly. A token refers to securely stored information. Based on that reference, the token owner can complete the agreed transaction.
A token is like a key. If you don’t know which vault it opens, it’s useless. But once you insert the key into the right lock, you gain access to a secure environment that contains the information you need—such as payment or address details.
A well-known example of token use is the Dutch public transport card, the OV-chipkaart. You submit your personal data once, and in return receive a card that lets you check in anywhere in the country—without logging in or sharing your bank info every time. The token inside the card enables automatic identification and payment during check-in and check-out.
In principle, the concept isn’t new: tokens have been around for a while. Just like QR codes, a proven method has become the perfect answer to a new challenge. This is largely due to the growing focus on privacy and data security. Tokenization makes it possible to store personal and payment data separately.
This means customers don’t have to repeatedly enter all their details when logging in or purchasing online. And merchants only access the information needed to start a transaction. It’s not only more convenient—it also reduces the risk of data misuse or theft, since sensitive info doesn’t need to be sent across the line each time.
“A token is like a key. If you don’t know which vault it opens, it’s useless.”
— Frank Jongenotter, Senior Client Integration Manager at Buckaroo
While tokens are gaining ground in payment systems, they’re especially on the rise in blockchain applications. And that makes sense: wherever transactions of valuable assets occur, tokens can be used. Think of real estate, stocks, money, service entitlements, and even vouchers.
One example is NASDAQ. This American tech exchange has tokenized shares of some private companies to reduce overhead costs. Another is Sweden’s central bank, the Riksbank. They’re exploring the idea of issuing Swedish Krona as unique tokens*, to examine whether they could eventually replace cash.
It’s not just currencies or stocks—tokens also hold huge potential for customer loyalty programs. Loyalty points can easily be digitized using tokens, making them cheaper, faster, and easier to implement—even for smaller shops.
This opens the door for things like coffee shop loyalty points to be tokenized. Instead of physical loyalty cards, shops could issue tokens. After collecting ten points, a customer could pay for their coffee using tokens, gift them to a friend, or convert them into euros.
Is secure payments a key topic for your business? Then it might be time to explore how tokenization can add value. It helps shield sensitive data while simplifying the customer journey. At the same time, keep an eye on new developments—especially in loyalty services.
No need to reinvent the wheel. Look at what’s already available and get advice on how to apply it to your business.
This article is part of the 'Improve Your Cashflow' dossier on mt.nl.
* Source: A perspective on electronic alternatives to traditional currencies
Gabriele Camera, Economic Science Institute, Chapman University and WWZ, University of Basel