Tokenization is a popular security technology used to protect consumer credit card data from thieves and hackers.
But how does tokenization work? And what are the main advantages of this payment solution?
When customers swipe their credit or debit cards at the checkout counter, their personal account numbers (PANs) aren’t stored in the merchant's payment system. Instead, these 16-digit PANs get replaced with randomly generated token IDs.
Once the transaction goes through, the payment processor sends a confirmation back to the merchant with the randomly generated token ID which is stored in place of the PAN data in their system.
At no point does credit card data ever get stored within the retailer's environment. This makes it nearly impossible for criminals to ever get their hands on sensitive financial information. And thus the primary advantage of tokenization is security — i.e. protection from anonymous thieves and hackers.
But there are five additional benefits of tokenization:
1. Internal Protection
Tokenization doesn't simply stop anonymous criminals. It also protects sensitive information from those connected to your organization, including employees, vendors and suppliers. Remember that the randomly generated token IDs are unreadable by anyone else but the payment processor.
2. Reduced PCI Scope
Tokenization makes it easier for merchants to become PCI compliant. Because retailers don’t store any data, they don't have to invest as many resources protecting sensitive customer information.
Tokenization also makes PCI audits much easier (and cheaper).
3. Online Protection
You’ve probably heard of EMV — chip-enabled credit cards that offer extra security for retail shoppers. For a transaction to go through, the chip must be present and customers must supply either a signature or personal identification number (PIN).
But in the online world, these security features become obsolete since the chip isn’t physically present at the time of purchase.
By contrast, tokenization offers unparalleled protection — whether you conduct business online or at traditional brick-and-mortar store.
4. Compatible with Other Technologies
Tokenization not only works with credit card plastic, but it also works with gift cards, NFC payments, ACH transfers and Apple Pay. You can protect your customers' data no matter how they choose to send and receive money.
5. Other Types of Information
In the U.S., merchants mainly use tokenization to protect financial information, but in many other parts of the world, retailers use this security technology for a broad range of personally identifiable data, including:
- Patient records
- Employee files
- Usernames and passwords
- Email addresses
In the wrong hands, these types of details can sometimes do far more damage than stolen credit card can.
Ready to Tokenize Your Payment Environment?
There is one final advantage worth mentioning.
Tokenization is incredibly cost-effective.
Unlike other payment security features, tokenization is relatively easy to set up. You don't need a lot of additional hardware since most of the changes happen on the payment processor's side. When you factor in fewer fraudulent losses and cheaper PCI audits, upgrading to tokenization is an investment that pays for itself.
To begin taking advantage of the above benefits (and save money in the process), visit: Secure Tokenization at BluePay.