Why Is Credit Card Tokenization Important? How Does It Work?

Credit card tokenization is the process of replacing sensitive user data with non-identifying tokens when storing that information for future reference. In other words, rather than storing the users’ real credit card numbers, tokenization stores a special string of characters that can be used to retrieve that information securely in the future. This article explains what tokenization is and why it’s so important, as well as its different types, benefits, use cases, and potential challenges.

What Is Tokenization?

Tokenization is the process of replacing sensitive user data with non-identifying tokens when storing that information for future reference. In other words, rather than storing the users’ real credit card numbers, tokenization stores a special string of characters that can be used to retrieve that information securely in the future. Tokens can be used to represent any sort of sensitive data, from credit card numbers to social security numbers, medical records, and more. And while the information stored in a tokenized system is not 100% secure, it’s significantly safer than storing sensitive data in plaintext.

How Does It Work?

TokenEx replaces sensitive credit card information with a token in your environment, allowing you to use a token in place of the credit card number. TokenEx generates tokens using randomly generated data to tokenize credit cards, allowing you to store sensitive credit card data outside of your environment while receiving a token in return. When you swap credit card information, such as the primary account number (PAN), with a token, you no longer have to store customers’ credit cards in your systems. Using our Transparent Gateway, you can send the credit card information to any destination via our processor-agnostic protocol.

Why Is Tokenization Important?

Tokenization is an important part of keeping customer information safe. When sensitive data is stored in plaintext, it is significantly easier to be compromised by hackers. If an attacker gains access to that data, they can do serious damage to the businesses and customers involved. If a hacker were to gain access to a business’s database and steal a customer’s credit card information, they could use it to make fraudulent purchases and cause serious damage to the customer’s credit score. If the business is unwise in storing that information, the hacker could also gain access to the rest of the database, compromising other customer information and putting the business at risk of facing serious legal consequences.

Read more: Card processing merchant services

Types of Tokenization

There are many types of tokenization, but some of the most common include – – Credit card tokenization – Credit card numbers are broken into pieces and replaced with non-identifying tokens. This is especially useful for businesses that accept credit card payments online. – Social security number tokenization – Social security numbers are replaced with random tokens, keeping them safe and secure. – Medical record tokenization – Medical records are often extremely sensitive, but tokenization allows them to be stored securely. – Passport tokenization – Passport numbers are broken into several pieces and replaced with random tokens for safe storage. – Driver’s license tokenization – Driver’s license numbers are already broken into pieces, which makes them the perfect candidate for tokenization.

Benefits of Tokenization

Tokenization provides many benefits to businesses and customers alike – – Security – By storing sensitive data in token form, businesses can maintain the data’s integrity while also securing it from potential attacks. – HIPAA compliance – Tokenization is often used for HIPAA compliance since it allows businesses to store patient data without giving someone access to the original information. – Improved customer experience – With tokenization, customers don’t have to worry about their sensitive personal information being stored by the business. Those customers can rest easy knowing that their information is secure. – Better customer retention – When customers know their sensitive information is secure, they’re more likely to stick around and come back again. They’re also more likely to recommend the business to others.

Use Cases for Tokenization

There are a wide variety of use cases for tokenization – – Payment processing – Tokenization is a popular method for credit card payment processing, both online and in-store. – Record keeping – Medical records, personnel records, and more can be kept safe and secure with tokenization. – Social media – Social media sites often tokenize customer information for security. – Online shopping – Tokenization is used for storing customer information for online shopping as well. – Website login – While not all websites use tokenization for login information, many do for security and compliance reasons. – Encryption – Tokenization is a type of encryption and can be used for everything from securing emails to securing data in databases. – Password protection – Many cloud services like Dropbox and Google Drive implement tokenization to keep information safe. – Password reset – Tokenization can also be used to reset passwords and keep them secure at the same time.

Potential Challenges of Tokenization

Tokenization is a powerful method for securing sensitive data, but it does come with certain challenges – – No silver bullet – Tokenization is not a silver bullet for security concerns. While it does significantly reduce the risk of data breaches and other threats, it is not a foolproof method. – Risk of being breached – Even though sensitive data is not stored in the system, a tokenization breach can still be harmful. If someone gains access to the tokenization system and steals the tokens, they could still cause serious damage. – Manual retrieval – While tokenization can be used for automated retrieval of sensitive data, it is often done manually. This means that data must be entered manually when it is needed, which can create inefficiencies in the system.

Conclusion

Tokenization is an important part of securing sensitive data and keeping customers (and businesses) safe. Tokenization can be used to secure everything from social security numbers to credit card numbers and can be deployed in many different ways. While tokenization is a powerful and effective method for securing sensitive data, it is not a foolproof solution. Businesses must be mindful of the challenges of tokenization and take steps to mitigate them.