What is credit card tokenization?

Credit card tokenization is the process of completely removing sensitive data from a company’s internal network by replacing it with a randomly generated, unique placeholder called a token. For instance, if a card number was 1234 5678 8765 4321, it would end up looking something like E67TY8GQ27X. This token is used to access, retrieve, and maintain a customer’s credit card information to ensure a higher level of security for both the customer and your business.

More and more businesses across the United States are adopting this credit card security measure. Many find it easy to use, more secure than end to end encryption, and cost effective, but what else is there to know before deciding if tokenization is right for your business?

Defending Against Fraud

The benefit of this security process is that the randomly generated token has no true meaning or value. In the past, a breach in a company’s system could yield all that a criminal needs to make fraudulent purchases, but these tokens hold no useful information for them and cannot be reverse engineered as there is no algorithm to change the token back. With fraud on the rise, credit card tokenization services are a great way to meet PCI DSS requirements and keep your customer’s safe.

Tokenization vs Encryption

Both are excellent ways to combat credit card fraud, but knowing the difference between the two can help you decide which is best for your business. While tokenization utilizes a placeholder for the information, encryption uses a different algorithm to scramble the data until you choose to decrypt it. This system uses two keys, one public and one private. The public key is only responsible for jumbling the information as it is transferred or while it is at rest, and the private key is held by a business for the purpose unscrambling and viewing the information. Without access to the private key a criminal stands no chance of deciphering a card’s information, but it is still kept in a company’s internal network.

Many prefer tokenization as it completely removes a customer’s information from a company’s internal network. In the event that there would be a breach, there is simply nothing for a criminal to find besides tokens that are useless to them. This added safety not only helps to avoid liability, but also helps your customer’s to feel better protected.

Tokenization and You

If your business accepts, transmits, processes, or stores credit card information in a storefront, online, by phone, or by mail, then you must meet the rigorous PCI requirements every year. Staying in compliance with these requirements can prove to be a difficult task, and no one wants to be held liable in the event of criminal activity. Utilizing tokenization, you can rest easy knowing that your customer’s information is kept safe, all of your transactions are secure, and that the PCI requirements are met, all at an affordable cost. When combined with safety measures such as EMV readers and smart cards, the threat of credit card fraud is at an all time low.