Tokenization is a famous security mechanism, retailers, payment processors, and financial institutions use to keep sensitive personal and financial information safe from thieves. This fraud-prevention technique is analogous to data encryption in several ways. Both are used for similar reasons, particularly in the continuous fight against fraudulent transactions, security breaches, and cyberattacks. On the other hand, tokenization varies from standard encryption in many significant aspects, which we shall explore today. Here’s everything you need to know about tokenization, including how a tokenization platform functions and the benefits they provide.
WHAT IS TOKENIZATION?
Tokenization is the technique of swapping sensitive information for non-sensitive data called “tokens” that may be utilised in a database or internal system without bringing it inside the scope. Although the tokens are irrelevant values, they maintain some features of the original data (often length or form) so that they may be utilised for continuous business processes. The original sensitive data is then securely preserved outside of the company’s internal systems.
Tokenized data, unlike encrypted information, is impenetrable and irrevocable. Because there is no logical/mathematical link between the token and its original number, tokens cannot be restored to their original format without the existence of extra, independently stored data. As a consequence, a tokenized environment breach will not jeopardise the original sensitive information.
Tokenization is used to safeguard sensitive data while keeping its commercial usefulness. This varies from encryption, in which sensitive data is transformed and kept in ways that prevent it from being used for commercial purposes in the future. If tokenization is similar to a poker chip, encryption is similar to a lockbox. Encrypted numbers can also be decoded with the appropriate key. On the other hand, Tokens cannot be reverted since no substantial mathematical link exists between the token and its original number.
HOW DOES TOKENIZATION WORKS?
A Tokenization platform replaces all of a user’s payment information with non-specific identifiers defined as “tokens.” Each of these tokens are produced at random when a consumer enters their transaction information at the point of sale (POS). There is no visible link between the user’s payment data and the resultant tokens by default. For instance, a credit card number such as 4551-1894-5544-6289 could be tokenized into a considerably shorter value such as B9f3%6fuVh.
This token can only be matched against the customer’s original credit card number by the trader’s payment platform. Anyone else will be unable to read it. Fraudsters cannot reverse-engineer the user’s payment details even if a token is captured in the middle of transit across an insecure network. They have no use for the token, and it cannot be utilised to make transactions.
Tokenization also enables the retailer to safely record a user’s payment information (in the form of a token) for administrative tracking and reporting. Only the randomly generated token — not the customer’s account number — stays in the vendor’s payment environment and tokenization platform. Again, even if this data falls into the hands of the wrong people, it is useless to everybody.
BENEFITS OF TOKENIZATION:
Tokenization has the potential to give many significant benefits for safeguarding sensitive consumer data:
- Increased client assurance—tokenization adds an extra degree of security to eCommerce websites, enhancing consumer trust.
- Enhanced security and breach protection—by utilising tokenization and reliable tokenization platforms, organisations avoid recording sensitive information in their input terminals, storing it in internal databases, or transporting it across their information systems. Businesses are protected against security breaches as a result of this.
- Tokenization increases the security of credit card payments—the payment card industry must adhere to stringent standards and laws. Tokenization systems safeguard cardholder data such as magnetic swipe data, main account numbers, and personal information. Businesses can more effectively comply with industry regulations and better secure customer information.
Many retailers disregard this fraud-prevention technique because tokenization isn’t mandated by law. Nevertheless, at a time when security breaches and cybercrime are on the upswing, companies should utilise every technique at their disposal to protect the information of their customers. Few technologies provide the same level of security and peace of mind as tokenization offers.
However, you must also ensure that you utilise a trustworthy tokenization platform. A competent tokenization platform will take any original sensitive payment or private details from your company systems, substitute each data set with an unreadable token, and preserve the actual data in a safe cloud environment apart from your business systems.
NOTE: Article prepared in cooperation with Norion