What is tokenization? Tokenization is the process of substituting sensitive data with unique identification symbols that retain all the essential information without compromising security. The sensitive payment information is replaced with a set of unique characters or a ‘token’ without compromising the security of the transaction. It is different from encryption in that it generates a new token for every user and links the provided data to a token but does not have a way to decrypt the token and reveal the original data. In the process of online payments, tokenization is the technology of replacing the 16-digit payment card number with a unique digital token in mobile and online transactions. Identity theft, phishing and data stealing are some of the common threats and frauds that customers are facing. The increased use of mobile and electronic devices for online shopping and purchases has increased around the globe. This also gives a window of opportunity for fraudsters to take advantage of the disclosed debit and credit card details. The technology of tokenization that electronically disguises the sensitive information shared by the customers helps to create continuity in the customer experience and minimize the impact of fraud and data thefts. With the favourable results that the tokenization solution has delivered so far, it is slowly becoming one of the most reliable technologies used by existing and new businesses.

 Where is tokenization used?

Tokenization is used across industries as it is versatile in its utility. Since tokenization aims to protect sensitive data while protecting business utility. It is primarily used in the Payment Card Industry (PCI). Google Pay, Samsung Pay, Apple Pay, and many other mobile banking solutions use tokenization. It is also used in contactless payment applications such as magnetic technology in the case of Samsung Pay and NFC and, in the sound-based technology of Tone Tag. The PCI chooses tokenization over encryption due to the added layer of security. In comparison to many other data protection methods, it is also cost-effective, ensures a better user experience, and is easy to integrate. Another reason for choosing tokenization is that it meets the compliance standards and makes it easier for digital payment service providers to get licenses.

The technology behind Tokenization

Tokenization is different from encryption; It has a specified algorithm that is mathematically irreversible. Here is a breakdown of how it works:

• Customer inputs their name and credit/debit card information at the time of executing an online transaction
• The customer permits the payment service provider to save detail.
• Details are then sent to the service provider.
• A token is requested from the payment service provider.
• Tokenization generates a substitute and unique identity of the payment detail.
• The requested token is shared with the issuing bank. The card’s bank or issuer is the only party that can view the token.
• When confirmed, the token is authorized with the users’ PAN number
• The token can now be used for future online transactions.

Why is tokenization important

Tokenization is a new layer of protection for digital payments without causing friction in the shopping experience. It does not require merchants to make any changes in their current payment acceptance systems significantly. The biggest benefit is that payment card numbers are no longer used or saved; therefore, no unauthorized card access can occur. For customers, this provides added security and convenience while maintaining the smoothness of making a transaction. It eliminates the need to enter and re-enter the account number when transacting on a smartphone or any other device. Tokenization is safer than magnetic strips because tokens don’t save the consumer’s account number. There is less risk in saving tokens on mobile devices online by e-commerce merchants and in cloud-based mobile applications. Even if it is hacked, there wouldn’t be anything of use as it devalues and discards the entire data. While speed and ease are key benefits, customers feel reassured and confident while making online payments. This is where tokenization adds value to the customer experience.

Conclusion

Data tokenization technology has re-modernized the digital payment ecosystem. It has introduced a new standard in the finance industry that provides fast, convenient, and secure mobile money solutions for businesses, with security being the foremost priority. Tokenization enables the digital wallet service provider to optimize their system and make it a competitive, secure, and efficient platform for users. Even though the technology itself may at first seem complicated, but is very simple and hassle-free. In no time, tokenization will become a cornerstone for payments across digital platforms.

About SNS

Security Network Solutions (SNS) provides a quantifiable, risk-based approach to building a global structure of cybersecurity infrastructure based on internationally recognized frameworks and practices. We have been providing services and catering to clients across industries for the last 22 years. Write to us at [email protected] or visit us at www.snsin.com.