When discussing credit card processing security, tokenization has to do with the information used to conduct a payment for goods or services. Normally, in a less secure world, a consumer would swipe their credit card through a magnetic stripe reader. Then, their card data would flow around the networks (banks, card issuers, credit card processors, businesses acceptance device, etc). That’s a lot of information going from channel-t0-channel.
As technology advances, this methodology has lost a lot of its viability, because if at any point the customer’s card holder data was acquired by a malicious force, it could be used without consent. However, tokenization fixes that problem by swapping out the credit card data and replacing it with a unique string of code known as a token.
Common Questions about Tokenization
How does tokenization protect my business?
There are no two ways about it. If you run a business and accept payments, you are automatically at risk of being attacked by data thieves. Having yours or your customers’ data stolen can become a massive headache for business owners, resulting in loss of business, customers, and incurring penalties from card brands or regulatory industries.
However, with a secure and effective security system protecting you like tokenization, business owners can rest assured the data they are responsible for is being protected. Tokenization swaps the credit card data from a business’ internal network and switches the data with a unique, one-time string of code called a token. The system then sends that token around gathering permissions to authorize the transaction.
The benefit of this is that the token can only be used once and is totally useless to anyone that might steal it. If a thief stole the token and tried to use it for any purpose, it would not work.
What do these tokens look like?
Let’s say for the sake of this example that the credit card number was 1234-5678-0976-4312, the token might become EJAHD1234USH84728. It is randomly generated without an algorithm available to decipher back to the original card data.
If you ran that same credit card number later that day (1234-5678-0976-4312), a new, unique token would be created. It would not use the same token as above, making every transaction more secure and safe from fraud.
How does tokenization assist in PCI compliance?
By not retaining any card holder data and utilizing this very secured method of data acceptance, it helps small businesses remain compliant. This enables small businesses to protect both themselves from breaches that result in valuable data being stolen, while protecting their customers.
Does tokenization change the customers’ experience?
No. Using this security method to transmit your customers’ data with your merchant services account offers the same experience as any other method. Customers can still swipe or insert their cards without completing any additional steps. Additionally, businesses can still process refunds, voids, credits, and more the exact same way as before. The only difference now is everything is much safer.
What is the difference tokenization and point-to-point encryption?
Point-to-point encryption is similar to tokenization in that it protects customer data. P2PE or point-to-point encryption is a sophisticated security measure that protects information acquired through swiping or dipping credit cards while accepting payments. It accomplishes this protection by encrypting the data as it travels from point-to-point, gaining approval or denial for the requested purchase amount.