Tokenization for Credit Card Payment Processing: What You Need to Know

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As a business owner or CEO, you’ve probably heard enough about credit card payment processing security to last you ten lifetimes. Payline is of the opinion that there is always more to know, so we are here to give you more. This time, we are talking tokenization.  

An always present concern when it comes to credit card payment processing or payment processing of any kind is the security, not just for your customers but for your business as well. Tokenization is a form of security that quietly protects credit card payment processing from fraud and hacking attempts, but what is tokenization actually?

Tokenization with credit card payment processing is a process that we don’t even notice but that has several moving parts. When dealing with a credit card transaction, here’s how tokenization plays its part.

Similar to how tokens are used in place of actual money at an arcade, tokenization is somewhat of a placeholder to replace the actual credit card number, therefore keeping it safe. The placeholder in this case is a string of random numbers and letters to cover the 16-digit credit card number. This random string is what is actually used during credit card payment processing.

The security that tokenization offers is quality protection. The secure “token” is what is passing through all of the POS terminals and online payment gateways when doing credit card payment processing. The actual credit card information is not “unlocked” and released to the payment processor until the very end. In non-tokenized credit card payment processing, there are more opportunities for credit card information to be snatched along its processing journey, since nothing is actually hiding the number.

You may be wondering how this is is any different than using encryption to protect credit card payment processing. The difference is small, but it makes a big impact. When credit cards go through tokenization, the number is tokenized for processing but none of credit card data is stored permanently, providing more security than encryption. With encryption, credit card numbers are still similarly converted, but they are also stored, which gives hackers more time to access information. Encryption requires a bit more regular attention than tokenization does in order to maintain security.

Encryption creates a data code to protect the credit card information similarly to tokenization, but the difference is that a tokenized code is totally random and never repeated. The fact that codes produced via tokenization are never used twice lowers the chance for hackers to obtain sensitive information. It significantly reduces the success of their guessing game, providing more security to credit card payment processing.

Tokenization is mutually beneficial to you and your customers. Not only will having this security measure in place will give you credibility as a secure, trustworthy business, it will also make the shopping experience for your customers much more secure. Multiple tokens can be produced for the same card, but every token will be different. Implementing tokenization for credit card payment processing online means you’re making your business stronger in the fight against fraud, and that is a hard benefit to beat.

Fight Fraud

This piece was written by Lauren Minning, Content Specialist for Payline.

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