Tokenization as a Future of Payment Security. End-to-end encryption has been providing security during the transaction of payments for some time now. While it is handy in several instances, it can be bypassed, as evidenced by the different cases of data breaches across the world. For the specified reason, there has been an ever-increasing need for better security measures, in this case, tokenization.
So, what exactly is tokenization? In this context (data security), it is the replacement of a sensitive piece of information with a non-sensitive equivalent, called a token. The token has no value and is used as an identifier that traces back to the confidential information only via a tokenization system.
Defining Payment Tokenization
Payment tokenization is a way of securing financial data, for example, credit card details and bank information during transactions. It works like so: instead of relaying sensitive information from a user’s credit card during purchases, the data is replaced by a token that is generated instantly and randomly. The token contains anywhere between thirteen and nineteen alphanumeric characters that leave out the PAN or other details that identify the user.
What can you expect? One, the token is unique for every transaction, meaning it cannot be used in another shop for a different purchase. Two, by leveraging payment tokenization solutions, the customer data that is stored by online stores becomes worthless for hackers. Finally, data payment breaches will not affect users since none of their sensitive information is stored on servers.
How Tokenization Works
Tokenization works differently from EMV systems. It does not utilize end-to-end encryption but instead has a specified algorithm that secures the details of the cardholder, keeping them safe from anyone’s access. Below is a breakdown of the tokenization process for mobile or online payments.
- Users provide their names and credit card information.
- A token is requested from the payment service provider.
- The token request is shared with the user’s bank or account provider.
- When confirmed, the user’s PAN is substituted with a token.
- The token is utilized for permitting a purchase.
Tokenization is Suitable For?
Tokenization is suitable for any venture that leverages a subscription-based model of conducting business. It is also perfect for stores that have significant trade with their repeat buyers. The bottom line- tokenization is ideal for enterprises that seek to offer customers a smooth experience during checkouts. It is because tokens can be stored securely and utilized to allow single-click payments during future transactions.
What Can Be Tokenized?
The positive impact brought about by tokenization in enhancing payment security has led to the proliferation of an array of new methods of payments. As a result, modes such as mobile, online, wearable devices, and contactless payments have come to the fore, all capable of being tokenized.
