Tokenization and New Forms of Payment Risk in the Digital Economy

Abstract

This article examines tokenization as both a security mechanism and a source of new payment risks in the digital economy. The study synthesises recent evidence on how tokenization supports the growth of contactless cards, mobile wallets, instant transfers, and embedded finance while reshaping risk at the user, platform, and system levels. Tokenization reduces exposure of sensitive payment credentials and helps contain card not present fraud by limiting storage and transmission of primary account data within digital wallets and online platforms. At the same time, the review shows that concentration of mappings in token vaults, reliance on specialised token service providers, and complex token lifecycle management introduce fresh operational, governance, and legal vulnerabilities. The extension of token based designs into tokenised deposits, central bank digital currencies, and programmable settlement infrastructures further links tokenization to liquidity, run, and contagion risk. Overall, the article argues that tokenization should be viewed as a structural innovation that reconfigures the architecture of payment risk rather than as a narrow technical fix and for future empirical research.