Credit Card Tokenization

With the advancement of technology, we have got a new as well as advanced shape in the online payment terminals. Nowadays, there are different ways through which one can make payments online. We have now credit cards, debit cards, mobile payments, and many more. However, the term, ‘tokenization’ is something that is inextricably associated with mobile payment applications. These applications are Google Pay, Amazon Pay, Apple Pay, and many more. Basically, it adds an extra layer of security that keeps your personal data protected.

However, we have made a brief breakdown of credit card tokenization. So, don’t forget to go through the following points:

Definition of Tokenization

The tokenization method is mostly used by mobile payment systems. It basically generates a virtual account number which is shared with the merchants while making transaction. Thus, it keeps the information of your card linked to the mobile wallet safe and secure. This algorithmically generated digit is called token and it plays a very impactful role when it comes to the prevention of credit card fraud.

In the case of credit card tokenization, the Primary Account Number or PAN of the customer is replaced with a randomly-generated number which is called token. After that, the number is passed through different wireless networks in order to complete the online credit card payment through the wallet. In this process, the information of the actual bank is not exposed as it is kept in the highly-secured token vault.

Well, you can compare the credit card tokenization method with a nationwide shift to chip cards. The process has gained a huge success because of its capability to stop the bad guys from copying your bank details onto another card. However, chip cards offer protection against fraud when you pay at a physical store through several virtual terminals such as pay at the table or point of sale system. But, tokenization is designed in such a way so that it fights digital or online breaches.

Tokenization or Encryption

Before the appearance of tokenization, there was encryption. Well, encryption still exists but it has lost its efficiency or we can say black hat hackers have already known how to decode encrypted data.

People used to refer to encryption when it comes to protecting sensitive data. Encryption basically transforms a data into an unreadable form. A person without a proper decryption key will not be able to go through this. Encryption can be used in various ways ranging from cloaking sensitive information in P2P applications to transferring private information in a vulnerable environment.

But, after the coming of the tokenization method, payment experts start giving more preference to this over encryption. This is because tokenization is a more secure and cost-effective way to safeguard as well as protect sensitive information. Recently, it has gained a huge success in the payment processing industry.

Through this method, users can store the information on credit cards in mobile wallets. Moreover, it makes the transaction successful without exposing the information of the original card. It replaces the sensitive card information with a stand-in token and therefore, you don’t have to worry about your card details while making payment on e-commerce websites or making online payments in restaurants through mobile wallets.

On the other side, encryption encrypts the cardholder data, and then it is decrypted at the end destination. Some applications that use this method are Whatsapp, Apple’s iMessage, etc.

When Tokenization Method is Used

The tokenization method is used in several cases in the payments industry. But, here we will give you three examples.

First, this method is used when “card on file” is kept for subscription billing and recurring payments.

Secondly, “one-click” checkouts in e-commerce sites.

Thirdly, when you do bill payments using NFC mobile wallets such as Google pay, Apple Pay, and Samsung Pay.

Payment Tokenization- Explanation

• Apple Pay Tokenization: After taking the picture of your credit card and loading it into your Apple device, the device sends the information to the card’s issuing network or bank. After that, the information is replaced with a token (randomly generated number). Finally, the token is sent back to the device and it is stored into the device. Well, this means that it is impossible to do any sort of fraudulent activity with the information stored in your device.

• Android Pay Tokenization: It is almost similar to Apple Pay tokenization. After loading the card information to your wallet, a stand-in token is created by Google and it replaces the actual number. Therefore, it becomes impossible for someone to get your actual card information.

In a nutshell, we can say that tokenization is a complicated process and it is the future of security. Therefore, there is no harm to know the basics of credit card tokenization.

So, if you are a businessman and looking for virtual terminals for payments or credit card terminals that support credit card tokenization, you must get in touch with International Payment Solutions.