What is Credit Card Tokenization?

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What is Credit Card Tokenization?

Credit Card Tokenization is the procedure of removal of sensitive information from the internal network of a company by having it substituted with a token.

Credit Card Tokenization refers to the procedure of full removal of sensitive information from the internal network of a company by having it substituted with a token – a unique, randomly generated placeholder. Such a token is used for accessing, getting and maintaining the credit card data of customers, in order to achieve a higher security level for business as well as customers.

Why Was Credit Card Tokenization Developed?

As time passed, the need for powerful and reliable security measures increased. The requirements and standards that the Payment Card Industry set out evolved to satisfy that requirement. The need for state of the art solutions increased as well. Criminals are developing newer ways for intruding into a system, and new techniques to secure sensitive data also have to be developed.

As a response to the requirement for dependable security, Credit card tokenization was developed. It is fast turning out to be among the best methods for the implementation of effective security and to attain PCI compliance.

What are the Advantages of Credit Card Tokenization?

A creative solution, Credit card tokenization has its basis on the idea that what is not there cannot be stolen by people.

Economical

This is an affordable way to assist businesses in abiding by PCI compliance standards, with no need to purchase costly software and hardware upgrades or installation. When there is on-site storage, your business can be vulnerable to attempts of intrusions of criminals. There can be attempts to intrude into your system. However, a powerful remote storage system can make the PCI compliance process more simplified, and ensure safety of the information of your customers.

Efficiency

Credit card tokenization happens to be an efficient way to deal with the payment processing requirements of your company, with no need to change your existing business practices in a major way. This is quite a simple process. Tokenization, in its most simple form, is just the method of getting a credit card no. replaced with a unique ID.

Improves payment security

Payment security can get a massive boost with credit card tokenization. Tokenization is a great way to safeguard the payment data of your customers, from possible internal issues as well as digital hackers from the outside.

Tokens that are generated in a random way can be read just by the payment processor. Even when these have been exposed, it is impossible to monetize the same. When a token passes through such systems, there are fewer risks of hackers and anonymous thieves committing a cyber crime.

Compliance

Lots of businesses gathering and storing sensitive information on their own network often experience difficulties in abiding by PCI DSS standards. In case there is a data breach, lack of compliance can lead to penalties imposed by the PCI Council. With tokenization, merchants can find it easy to abide by PCI DSS with the least security expenses and liabilities.

When the card data of customers is removed from the network, risks of data breach is minimized as well. There is no need to invest a lot of resources and money on safeguarding data. Credit card tokenization does this for you. With the aid of the tokenization technology, sensitive business information such as customer accounts, secret files, addresses and passwords can be protected as well.

Greater control

The main aim of tokenization is risk reduction and higher security. However, with tokenization it is possible to achieve more compliance. Controls can be reduced and sensitive data can be removed from the scope. When an irreversible token is used to replace sensitive cardholder data, the data can be removed efficiently from the data environment of a cardholder. As tokens are regarded as non-sensitive information, these may be stored and utilized for internal business operations with no bringing of the system which stores the same into scope.

The advantage of such a security process is the fact that the token generated randomly does not have any value or meaning. A breach in the system of a company earlier yielded all that was required by a criminal for making fraudulent buying. However, no important information is held in such tokens. These cannot ever be reverse-configured, given that the token cannot be changed back by any algorithm. As there is rise of fraud, PCI DSS requirements can be satisfied by credit card tokenization services very easily. It can ensure safety for your customers.

How Does Credit Card Tokenization Work?

Credit card tokenization works in simple ways, but can be very efficient in preserving the safety of customers.

The transaction is started by the cardholder. The sensitive data of the credit card of customers is entered.

The credit card data goes to the acquiring bank of the merchant as a token.

The token is transmitted by the acquirer to the credit card networks, in an attempt to ensure authorization.

The data of customers, after being authorized, is stored in the safe virtual vaults of the bank. There is matching of the token to the account number of the customer.

The funds are verified by the bank and the transaction is allowed or declined.

In case of a successful authorization, a unique ID or token is sent back to the merchant for existing and future transactions.

As the whole tokenized credit card payment procedure occurs behind the scenes, there is actually no need for customers to do something in a different way.

Wrapping Up

With Credit Card Tokenization, sensitive customer data is replaced with an alphanumeric one-time ID which does not have any association or value to the owner of the account. The token that is generated randomly is used for accessing, passing, sending and retrieving of the credit card information of customers in a safe way. The tokens do not have any value or meaning outside the system. No sensitive customer data is contained in the tokens. Rather, these serve as maps and point to the location where the sensitive data is stored by the bank of the customers in their own systems.