What Is Tokenization?
If you have a business that handles credit card data and corresponding information, tokenization can help you meet the cybersecurity requirements of the Payment Card Industry (PCI) and prevent a data breach.
But what is tokenization? Tokenization is considered a secure method used to swap out sensitive information with a token, or placeholder, that’s unique to the customer. The token will be different for every place a customer shops regardless of whether or not they use the same payment method.
Tokenization allows a company to retain all the information relevant to the payment process without keeping sensitive information on-site.
Unlike encryption, tokenization doesn’t use an algorithm or cryptographic keys that can reverse the data back to its true form. Tokenization makes it more difficult for hackers to access credit card and account data, therefore enhancing data security.
The Process of Tokenization
Tokenization and encryption are both forms of cryptography, but they’re not the same thing. With tokenization, a database called a token vault—where the real account information is stored—is used to maintain the relationship between the actual card number and the token.
Tokenization takes a cardholder’s personal account number (PAN) and replaces it with random numbers or alphanumeric characters, only keeping the last four digits of a card number. The token has no value and can’t be used to gain access to the real card number.
Some tokenization systems use encryption as an added layer of security for the actual card information stored in their token vault.
Tokenization helps businesses comply with PCI standards, which don’t allow credit card data to be stored on-site or to even enter company databases. To utilize tokenization, companies need to invest in systems that convert card numbers into tokens—they can do this by working with a third-party tokenization provider or by using the tokenization system of a payment processor.
Examples of Tokenization
If you’ve used a credit card on file to make a purchase, used mobile payment services such as Apple Pay or Android Pay, or been on a website that allows a returning user to buy a product with one click, you’ve come into contact with tokenization.
In-app purchases are another way tokenization is used. Customers can upload their payment information onto the app, where it is then tokenized. In this way, the apps don’t ever have access to the actual payment information, and customers are protected.
More retailers are offering these types of digital payment options in order to further secure customer payment data and reduce their liability.
How Tokenization Contributes to PCI Compliance
All companies that deal with credit card data must adhere to the requirements of the Payment Card Industry Data Security Standard (PCI DSS), which was developed by major credit card companies in an effort to reduce the occurrence and severity of data breaches.
The PCI DSS requires businesses to put measures in place to protect data and not store full account information in their databases in the event of a cybersecurity incident.
Although tokenization can help streamline your efforts to gain PCI DSS compliance, simply utilizing tokenization doesn’t mean you’ve automatically gained compliance, so be sure to review the standard and make every effort to gain compliance alongside tokenization.
Is Tokenization Right for Your Company?
When considering what is tokenization, consider that tokenization allows companies to better protect customer payment data and reduce their chances of a security breach. Tokenization also allows businesses of all sizes to reduce the cost and scope of gaining PCI DSS compliance.
If you’re considering implementing tokenization for your organization, there are few things to consider, but one of the most important is choosing the right tokenization provider. You’ll need to decide if you want a use a third-party provider’s tokenization system or use a payment processor.
Using a payment processor means you’ll only be able to work with that particular processor, but with a third-party provider, you can utilize multiple processors.
Summarizing What Is Tokenization
No matter which one you decide is the best for you, tokenization offers all types of companies a way to better secure sensitive information.
So what is tokenization? Tokenization is an excellent way to secure many different types of personal data and is beneficial for all parties involved in the payment process!
To learn more about the TokenBRIDGE Solution, contact: sales@GEOBRIDGE.net