Card PaymentsPCI Compliance

What Is Tokenization In Payments?

By April 13, 2021April 15th, 2021No Comments

Tokenization Meaning

Tokenization in simple terms is the procedure of substituting the sensitive details of any payment card with non-sensitive data. Why? By doing this a payment card’s PAN (Primary Account Number) is protected using an auto-generated and unique numerical code. This code is what’s known as the token.

These tokens will then be unreadable to anyone who does not have the original key used to generate the token, making them very secure. It is easy to share these tokens across networks and digital platforms securely and simply. This process significantly increases data security compared to traditional methods and reduces the risk of fraud and theft.

For an organisation, tokenization means they can use sensitive information for payments without keeping sensitive information on their servers. A big tick for PCI Compliance.

What is tokenization in payments
What are the Key Benefits of a Tokenization System?

Reduced risk of data breaches. As the sensitive data is replaced with unique unreadable codes to anyone other than the originator it is much more secure when shared.

Improved customer experience. A customers token can be stored easily meaning repeated purchases are effortless. Think of the one-touch purchases when buying on Amazon!

A streamlined workflow. By storing secure tokens there is less red tape and process to manage to keep data secure.

Simplified recurring payments. Tokens also make the process of setting up subscriptions and applying refunds easy. Less red tape and manpower.

Helps in PCI DSS Compliance. Tokenization on its own does not make you PCI compliant but does go a long way towards this. This is because sensitive information is unreadable for the merchant and agents handling the transactions.

What Is The Difference Between Tokenization And Encryption?

While both are used for data security and ultimately PCI compliance, there are significant differences between the two data security methods.

Tokenization: Tokenization is only readable by the originator of the token it means that the data cannot be read elsewhere. This removes the organisations that are handling the data in the form of tokens from the scope of PCI Compliance.

Encryption: Encryption implements end to end security where the sensitive information is encrypted at one end and then decrypted at the other. This means the data when decrypted is open to the requirements laid out by the PCI DSS. As encryption involves reversible data it is much more of a data security risk.

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How Does Credit Card Tokenization Work?

Payment tokenization works for the majority of card payments this includes both debit and credit cards. It’s actually a very simple process and therefore requires a lot less management than traditional methods of secure payments. For this and the benefits listed above is why the tokenization platform is being embraced and continues to grow.

Once a consumer decides to pay, he uses a payment service such as PayGuard® which creates a token before it is handled by the merchant. This is then sent through to the payment gateway for the transaction to be completed.

Alternatively for subscriptions or recurring payments, these can be processed in a similar way without the need to access sensitive card information.

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The consumer goes to purchase a service or product
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They enter their card details to the payment service (PayGuard®)
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The token is generated (by PayGuard®) and sent to the merchant
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The merchant then uses this to process the transaction through a payment gateway
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The token can be saved for future transactions such as refunds or subscriptions
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When To Use Tokenization

Essentially tokenization is advantageous to any organisation taking payments and should be a serious consideration to help with their PCI Compliance.

The additional advantage as we have already touched on is the ability to safely keep information to hand for repeated transactions. These can be subscriptions or monthly finance payments but can also be for refunds or for any repeat customers. This is because customer tokens can be held safely, giving an improved customer experience for one-click payments.

Does Using Tokenization Make Me PCI Compliant?

PCI DSS directives require any organisation taking payment to protect their customer’s data in-line with the 12 main requirements of PCI Compliance (link). Using tokenization alone will not make you fully compliant but it does go a long way to reducing your PCI DSS scope.

Fortunately, PayGuard® can offer the technology to make your organisation PCI Compliant to Level 1 standards, with tokenization being a key part of this process.

PayGuard®’s Tokenization Service

PayGuard®’s built-in features allow for the recall of customers data with tokens that replaces sensitive information. This is perfect for call centres and businesses taking payments by phone providing a seamless and fast interaction.

Tokenization implementation is instant as soon as you use PayGuard®’s award-winning technology. This is just one of the many benefits of PayGuard® that includes full PCI Compliance, and faster payments. See How PayGuard works here, or find out more of our benefits here.

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Want To Know More

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