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How Does Credit Card Tokenization Work?

 By 2023, U.S. retailers will lose $130 billion each year on card-not-present transactions. Securing payment data is an ethical and legal obligation for businesses today. One of the best ways to make sure that customer data stays secure is with tokenization. Keep reading to learn about how credit card tokenization works and how you can start incorporating it to keep your business secure and PCI compliant.

What Is Tokenization?

A company can protect its sensitive data from criminal attacks with tokenization. Tokenization is the process of swapping sensitive data for “tokens”, which have no meaning or security risk associated with them. This swap is important because it adds an extra layer of security for the original sensitive data. In the case that a criminal breaches a tokenized company, they’ll only be able to access meaningless, dummy information in the tokens.

You may be asking, “If tokens swap the original values for meaningless placeholders, how do they accomplish anything?” Tokens contain trace elements of the original data like length or format that lets them be integrated in place of confidential data, keeping your operations uninterrupted.

Many people confuse tokenization with encryption. Where encryption processes are reversible, tokenized data is completely undecipherable. There is no relationship between a token and its original number, meaning that if a token is compromised a hacker has no way of using it to get access to the original form. While encryption jumbles data, tokenization replaces it entirely.

For a simpler way to understand tokenization, compare tokens to poker chips. Poker chips are dealt to you by the house (your PCI solution provider) for your gambling processes. The chips have no value in and of themselves, and only exist to serve as a placeholder for real cash. When you’re ready to cashout, you simply return to who provided you the chips and exchange them again for real money. Tokens follow this same process!

How Does Credit Card Tokenization Work?

Now that you better understand how general payment tokenization works, how does credit card tokenization work? Credit card tokenization implements the process described above and applies it to credit card numbers. This is the ideal solution for meeting PCI compliance requirements and making sure that your customers’ payment information stays confidential.

Close up the stacking of credit cards with extremely shallow DOF

Why Credit Card Tokenization is Important

So we understand how credit card tokenization works, but why does it matter? Here are a few reasons why tokenization is important. Credit card tokenization:

Reduces Data Breaches

Hackers target businesses that frequently use credit and debit cards because of the wealth of information available from them. Not only can they use this information to make fraudulent purchases for themselves, but they can get access into your bank account or sell your private information to other people.

Builds Trust With Customers

Customers need to know that the business they’re working with has their best interests at heart. Incorporating credit card tokenization into your business is the best way to show customers that you care about protecting their sensitive data. All it takes is one data breach for trust to be totally eroded in your company. For a popular example, look at Enron. It’s likely that the first thing that comes to mind when they are mentioned is their decades-old scandal. While that affair wasn’t related to tokenization, it left a permanent mark on their company.

Reputation is everything when dealing with customer finances. In an industry where security is paramount, one data breach could lead to catastrophic consequences.

Makes PCI Compliance Easy

Failing to meet PCI compliance can lead to your merchant account being revoked, along with your ability to accept credit card payments. This would be extremely damaging to your business for obvious reasons.

A vendor that offers tokenization options can make PCI compliance simple. Make compliance a breeze by partnering with a provider of credit card tokenization.

Choose PCI Booking for Your Credit Card Tokenization Options

We hope that you now better understand how credit card tokenization works and how it improves businesses. If your business needs comprehensive PCI compliance solutions, turn to PCI Booking. We offer a full suite of PCI solutions with our PCI Shield or give you the option to choose what you need with Orchestra. Whatever the case, we’ll help your business meet its needs.