Payment tokenization is a process of masking sensitive card information with a randomly generated 16-digit number. We call this number “token”. This technology helps to protect the important information of the cardholder by ensuring payment will be only charred once and all the static card information is concealed.
Speaking about virtual cards and other electronic payment methods, tokenization technology provides an even better, more secure and faster payment process.
Tokenization and data security
Even though tokens contain random information, they also may have some elements of real original data so they can be used for uninterrupted business operations. Sensitive information in that very case is kept outside any database.
Tokenized data is irreversible and it’s impossible to decipher the number and compromise the sensitive data.
The goal of it is to remove any sensitive data from the system and replace it with the token which is impossible to decipher. The original data is stored separately in a cloud environment. When making a payment with a credit card tokenization system swaps the token with the corresponding primary account number and sends it to the payment processor for authorization. The PAN itself could never be stored or transmitted by the system.
However, the system does not prevent the exposure of sensitive data and hacker attacks. The advantage of tokenization is that there is no sensitive information stored in the system therefore there is no data to steal.
Why tokenize?
Reduce a compliance scope
Tokens are generally not subject to compliance requirements if there is sufficient separation of the tokenization implementation and the applications using the tokens. Encrypted sensitive data may not reduce compliance obligations or scope. However, tokenized data may remove needed systems from the assessment scope.
Restrict sensitive data
Tokenization may help to make access to sensitive information more secure by adding another layer of protection to it so only those with appropriate access can de-tokenize information.
Avoid sharing sensitive data with service providers
Avoid the risk of giving away your sensitive data to service providers by tokenizing it. The data is tokenized when the payment process is ongoing and then the token is returned to the cardholder. They should use it to complete the transaction.
Simplify data lake security and compliance
The complicated structure of the data lake makes it hard to set protection control at a satisfactory level. Tokenization at each data source can keep compliance-subject data out of data lakes, and help avoid compliance implications.
Allow sensitive data to be used for other purposes, such as analytics
By tokenizing data you can avoid data leakage to other parts of the system besides those where it is necessary for data analysis.
Understanding payment tokenization for card security
Sensitive cardholder data is not being transferred between networks but tokenized to protect credit card information. The cardholder information is never exposed during the payment process, which protects data from breaches.
Where could we apply this technology? Here are your options:
eCommerce: Payment tokenization gives an opportunity to make the payment experience more personalized by allowing users to alter the settings for their needs and use it for future purchases. Because tokenized card information is saved to their account, no sensitive data can be stolen or lost in event of a data breach.
In-app payment tokenization: Big retailers have launched in-app stores for those who shop on the go. With the buyers’ information tokenized there is no need to input it every time when making a purchase and ensuring that it is safe from leakage.
How does tokenization work
So how does tokenization work? With tokenization, your PAN is masked with a randomly generated number. The number prevents original data from being exposed. These tokens are anonymous and can only be charged once. This way, your business could provide clients with additional payment security.
Benefits of payment tokenization
Tokenization makes the payment process more secure. The main benefits of the technology are:
PCI Compliance: No need to store payment information directly.
Increased Security: Checks and wire transfers are the most vulnerable types of payments that’s why it’s rational to use electronic payment methods which provide tokenization.
Streamlined Payment Process: Tokenization helps to replace inefficient manual processes with fast and effective electronic payments.
Greater Visibility into Working Capital: Tokenized payments are debited immediately into the recipient’s bank account or crypto payment system account.
Widely Accepted: There is no big difference between standard credit card payments and tokenized payments so vendors accept them for their business easily.
Tokenization makes the payment process more secure.