Thanks to the success of Bitcoin, more people are aware of blockchain and its potential benefits than ever before. While most people see it as a way to complete online transactions, the reality is that blockchain can have so many more uses, including tokenization.
Businesses are always looking for ways to gain a competitive advantage, and tokenization is one particular area that could allow a business to use its resources more efficiently and achieve its goals. Companies such as NYALA offer investment funds tokenization with a high level of security and simple interface integration. In this article, we’ll explain what tokenization is and how it could help your business develop and improve.
What is Tokenization?
Put simply, tokenization is the process of creating a digital representation of a real thing. These tokens are then stored and used on a blockchain, allowing them to be traded, used to complete transactions or kept secure. Anything can be converted into a token, but the most common use cases are for financial assets such as cash, bonds, exchange-traded funds and even loans.
The tokens created are a completely digital, unique and anonymous version of the real thing. They’re designed to be used on Web3, which is a proposed decentralised version of the internet that gives users more control over their data and how they experience the web.
Applications on Web3 rely on tokens, and many businesses have seen the potential in future-proofing their companies. Some major financial services have already begun tokenizing their assets, with the total value of tokenized funds surpassing $1 billion in value. Experts have stated that they believe all financial assets will be tokenized in the future, meaning companies that act now can potentially get in on the ground floor.
Real World Advantages of Tokenization
There are many benefits of tokenization, although some might be more apparent in certain industries than others. Here are some of the main advantages for a business leveraging payment tokenization:
- Better security – Tokenised payments are more secure. Sensitive data is replaced by tokens, which improves security and means that customers are safer when entering payment details.
- Risk mitigation – Data breaches can cost companies significant sums due to fines and loss of business. By using tokenization, the chance of a data breach is lower, meaning it’s easier to comply with GDPR and other data security regulations.
- Improving eCommerce – Tokenisation for payments is particularly useful for eCommerce businesses, improving the payment process with additional security, helping consumers feel safer and improving loyalty.
- Better customer experience – Tokenisation can be used for multiple different kinds of purchases, including in-app, subscriptions, one-off payments and much more. Giving customers more options and a better experience is vital in improving retention and building loyalty.
- Cost-effective – Tokenised platforms use smart contracts to carry out transactions, reducing the cost paid to payment processors and saving money compared to traditional payments. The result is lower costs to the business, which can be passed onto the customer or used to increase revenue.
How to Implement Tokenisation
Before you start the process of tokenization, you need to consider how it can improve your business and whether the potential benefits outweigh the costs. There are a lot of factors to consider, including security, compliance and integration. The end result should be better transparency for your customers, and an improved experience overall.
If your business is looking to implement tokenization, you should make use of a company like NYALA, which removes the need for a costly third-party service. By ensuring your tokenization process is completely decentralised, you can save costs while improving security and lowering the risks of regulatory compliance issues.