What is Credit Card Tokenization? – An Essential Guide

We all know the importance of having a credit card. You can use it for everything from grocery shopping to buying plane tickets. The last thing you want is to lose your card or have your card stolen and used for fraudulent purchases. That’s why it’s so important always to access your credit card information.

Therefore, Credit card tokenization is a way to change a credit card number into a unique code that cannot use to charge a purchase. This way, Credit card fraud is greatly reduced as the potential thief cannot steal an actual credit card number. The beneficiary of this process is the consumer, who will always have the right to use their card with no fear of losing their credit or identity.

What is Credit Card Tokenization?

Tokenization is essentially an important process that enables digital currency payment without the need for a bank account. It’s essentially like a credit card but without any physical card. Instead, you enter an eight-digit number to pay for your purchase.

A token is a digital representation of an asset that uses to approve within a particular area. Tokens can represent the amount of money in a checking account and points someone has on their loyalty program. The most important thing about tokens is that they are only valuable in a specific space and not accepted anywhere else. It makes them very secure because users won’t lose their accounts or security codes if they forget them.

[Read more: How to Dispose of a Credit Card?]

How Does Tokenization Work With Credit Cards?

Tokenization is a type of technology that makes credit card numbers more secure. The real account number replaces with a random alphanumeric string in tokenized payment. Also, its string includes all the information needed to complete the transaction by issuing the bank’s routing and account numbers. Therefore, it can process as an actual credit card number.

TokenEx generates random, tokenized data that equals a credit card number and then sends the non-sensitive customer data to the customer. TokenEx does this with a processor-agnostic Transparent Gateway that is patented. The sensitive credit card data is removed from the system and sent to our Transparent Gateway for safekeeping.

Examples of Credit and Debit Card Tokenization

Tokenization used for credit and debit card transactions is not a new concept, but popular in recent years. There are many benefits to Tokenization, including the ability to process transactions faster and smoother. You may have heard about the Target data breach last year. It was possible because of a data-breach vulnerability that existed on their point-of-sale terminals. The use of Tokenization would likely have prevented a lot of the negative fallout experienced by Target.

• Contact Centers

TokenEx provides tokenization solutions that remove sensitive payment card information from point-to-point encryption (P2PE) systems. It reduces compliance costs and eliminates the risk that organizations store sensitive credit card data in their local IT systems.

TokenEx provides a solution to companies that rely on call centers for customer service. With TokenEx, companies accepting payments over the phone where no information from internal systems about customers’ payment card information reduces their scope for compliance.

• Ecommerce

Merchants or organizations that use online stores or payments through an application can benefit from TokenEx’s eCommerce tokenization. Our Ecommerce Package features the TokenEx iFrame and our patented Transparent Gateway, which minimize PCI compliance scope specifically for these customers.

For cards accepted for e-commerce, an Interactive Frame is a non-hosted snippet that allows you to collect cardholder data from the fields on your checkout page. There is a need to protect sensitive information and keep your PCI DSS compliant. With our interactive frames, you can use Tokenization alongside credit card processing.

• Mobile

TokenEx uses the same technology to capture cardholder data from websites and mobile apps. It ensures the consumer is not exposed to any stored device or software malware and gives organizations greater control of how data is tokenized.

Organizations have quick access to a secure and compliant supply of data that reflects the activities of their audience. Data is captured from sites natively or through encryption for risk reduction and industry compliance.

[Read more: What Is Counter Credit and What Does It Mean On a Bank Statement?]

Is Tokenization the Same as EMV Technology?

Tokenization is the process of replacing credit card information with a new token code that only has the number used for authorization. It is much more difficult for hackers to steal your credit card information because they need your password to obtain only those numbers. 

On top of this, the customer’s credit card information is not stored on the actual credit card. EMV technology is used to create an authorization key with each transaction, which authenticates the cardholder’s card and protects against fraud. EMV chips are available in credit and debit cards with the chip logo.

Tokenization vs Encryption

The difference between Tokenization and encryption is huge. Tokenization makes it more difficult for the attacker to find the data. So, encryption makes it more complex but not impossible. For example, if a hacker stole email addresses, Tokenization would make it more difficult for them to find an individual password, while encryption would make it impossible.

Encryption is a process that hides the meaning of data and makes it difficult for unauthorized users to understand. On the other hand, Tokenization is used to create a temporary representation of the original data used for sharing without sharing any sensitive or private information.

[Read more: Lying On A Credit Card Application – What to Do Instead?]

Who Benefits From Credit Card Tokenization?

Everyone except maybe for hackers. Credit card tokenization is like creating a new bank account with a credit card. Banks add the money that customers spend on their cards to their balance and then transfer that amount to customers’ accounts. The benefit for customers is that they’re not responsible for carrying around cash and paying fees because it’s all done electronically.

In order to use this service, people have to have an account at their bank. They also receive rewards for buying things with the card, such as points and miles. For banks, it’s easier to collect and follow up on charges when everything goes through an electronic system. One of the ways to prevent fraud is by replacing sensitive information with a token protected by a public-private key.

Conclusion

In the payments space, the card information is filled out on thousands of systems each day. Each transaction generates credit card data that protection of card details with industry regulations such as PCI DSS. With TokenEx’s cloud-based security platform, sensitive credit card information can be safeguarded and desensitized. It is used to keep the risk of theft at a minimum with virtually no hardware changes in your payment processing infrastructure.