With internet accessibility rapidly rising & a subsequent boom in e-commerce, more people are changing their shopping & payment methods. Digital transactions have been rising rapidly & ensuring payment security is crucial to protect users from cyberattacks & potential data breaches.

Payment Security has become a priority for every business to ensure security & build trust with customers by allaying their fears. Before Tokenization; Encryption was used commonly. Encryption can be reversed to retrieve information, but in the case of tokenization, it is next to impossible.

What is Payment Tokenization?

Tokenization is a process in which sensitive data or information is replaced with digitized tokens containing a unique set of characters. While conducting payment, tokens are generated automatically in real-time which replaces payment card account number or Primary Account Number (PAN) for online & mobile transactions. Using Randomly generated tokens instead of PAN ensures that sensitive data never reach merchant servers & also makes it next to impossible to reverse-engineer by adding an extra layer of security.

Importance of Tokenization:

While online transaction comes with their convenience; it also has their own set of risks. There always exists a chance of fraud; which has to be brought down as much as possible.

Tokenization is a handy tool to improve the security of the payment process as it does not need to give real sensitive data of users credit/debit.

As the whole process happens behind scenes; convenience for customers is intact as they don’t need to do anything differently.

Types Of Tokens:

a) Format Preserving Tokens: It maintains the feels & appearance of original data on the card.

Example:  Card Number: 2111 1112 1112 1112

                   Format Preserving Token: 4555 4632 2364 2355

b) Non-format Preserving Tokens:  It does not have a resemblance with original data & might include both alpha & numeric characters.

Example:  Card Number: 2111 1112 1112 1112

                    Non-format Preserving Token : 45ce92vfd17-80echfkf98755u0359

Process:

a) Customer feeds their card credentials in payment form thus initiating the transaction.

b) A token is generated in the payment gateway.

c) Once customer data is received by the system; it is passed for authorization from credit/debit card networks.

d) After authorization, a random token is generated which is sent to the merchant.

e) Bank checks the status of funds & decides accordingly whether to approve or decline the transaction

f) Merchant process payment with the token received from the bank which has secured vaults holding customer’s card details.

Benefits Of Tokenization:

a) Reduce Vulnerability: tokenization helps to process data securely & reduce risks of cyberattacks.

b) Non-Reversible:  Even if hackers are able to get tokens; that cannot be used or reversed to obtain sensitive user data.

c) Cost-Effective: Costs involved in managing & storing sensitive data securely by creating new infrastructure are reduced to a great extent.

d) User experience: Users can store card information in mobile wallets  & use it for subscriptions as well as one-click/ zero-click transactions. Enhancing user experience will also help to build trust with customers.

e) Recurring Payments: Allows payments easily for regular subscriptions & one-click transactions.

f) Fostering Trust: In this age, providing a secure way to transact for customers will go a long way in building trust & loyalty towards your establishment.

g) Less Red Tape: Helps you to achieve Payment Card Industry Data Security Standard (PCI DSS)  regulations.

Tokenisation has changed the way we transact. Substituting sensitive data with tokens is one of the best ways to ensure the security of customer data. Tokenization helps both merchants for gaining trust from customers & increasing business while customers can purchase & pay without any worries about their data.

Sreyas

sreyas@infintor.com

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