{"id":13016,"date":"2019-01-03T13:41:38","date_gmt":"2019-01-03T12:41:38","guid":{"rendered":"https:\/\/www.intellias.com\/?p=13016"},"modified":"2023-05-22T09:42:45","modified_gmt":"2023-05-22T07:42:45","slug":"payment-tokenization-and-its-impact-on-payment-security","status":"publish","type":"blog","link":"https:\/\/intellias.com\/payment-tokenization-and-its-impact-on-payment-security\/","title":{"rendered":"Payment Tokenization and Its Impact on Payment Security"},"content":{"rendered":"

Until recently, end-to-end encryption was the best defense for security in payment transactions. Designed to scramble user\u2019s credit card details, personal identification and account numbers while purchasing goods, it\u2019s a means of conforming to EMV<\/a> standards to protect against credit card fraud. Though highly effective in most cases, the system is open to vulnerabilities. Several high-profile data breaches<\/a> have been widely publicized, which have driven new security measures to take place.<\/p>\n

Payment tokenization accelerates the provision of secure transactions. Data security is of highest importance as consumer adoption of alternative payments such as card-not-present (CNP) and mobile payments grow. Implementing tokenization can be a seamless process, as there is little impact on issuer\u2019s back-end technology, and for merchants, no new hardware or software is needed. This added layer of security complements end-to-end encryption and creates a digital fortress to deter hackers.
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What is payment tokenization?<\/h2>\n

\"Payment<\/p>\n

Payment tokenization is a highly secure method of protecting financial data, such as credit card and bank details while performing transactions.<\/p>\n

Instead of sending sensitive data from a customer\u2019s credit card for online, mobile or contactless purchases, the details are replaced by a randomly generated alphanumerical \u201ctoken\u201d. This can be between 13 and 19 characters long that omits the primary account number (PAN), or any other details that could lead to the identification of the customer.<\/p>\n

Each token is unique for every transaction and cannot be replicated in any other store, for any other purchase.<\/p>\n

Using a payment tokenization solution, ensures all payment data stored for processing by merchants are rendered useless for hackers. Devastating payment data breaches such as the Heartland<\/a> security breach, cannot affect consumers, as their sensitive data is never stored on the servers in the first place.<\/p>\n

How does payment tokenization work?<\/h2>\n

\"Payment<\/p>\n

Unlike EMV protection<\/a>, which employs end-to-end encryption, a tokenization payment algorithm ensures the cardholder information is never transmitted or can be accessed by hackers.<\/p>\n

Tokenization processing for online or mobile payments:<\/p>\n

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  1. Customers enter their name and credit card details.<\/li>\n
  2. A payment token is requested from the payment service provider.<\/li>\n
  3. Token request is shared with the customers bank or account issuer.<\/li>\n
  4. Once approved, customers PAN is replaced with a \u201ctoken\u201d.<\/li>\n
  5. The token is then used to complete the purchase.<\/li>\n<\/ol>\n

    Where are payment tokenization systems used?<\/h2>\n

    \"Payment<\/p>\n

    Tokenization is increasing in popularity due to enhanced security measures. Payment providers are quickly catching onto the trend, using the framework in place to provide their own secure methods of payments.<\/p>\n

    Mobile payment providers like Apple Pay or Google Wallet, strive to ensure cashless transactions are effortless. By taking a picture of your credit card or inputting your card details to your mobile wallet, you can instantly make purchases with your phone in stores that accept contactless payments. In both cases, a token is produced in lieu of your credit card details, so no unencrypted data is ever stored on your device.<\/p>\n

    Credit card providers are using tokenization in the payment card industry. This gives an extra layer of security along with traditional methods of encryption. It guarantees even if servers are hacked, no raw credit card data is available to be misused.<\/p>\n

    E-commerce stores have implemented tokenization for online purchases. Online merchants use payment gateway providers, such as Paypal or Stripe, to process credit card details. If merchant\u2019s data servers are ever compromised, critical information remains safe as only token details are kept.<\/p>\n

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    How payment tokenization security has revolutionized the way we pay<\/h2>\n

    \"Payment<\/p>\n

    The success of tokenization in payment security, has influenced new ways of purchasing. Now there\u2019s no restriction on the many outlets of payment opportunities, as security has been vamped up. We\u2019re now at a stage where:<\/p>\n