What is credit card tokenisation?
Credit card tokenisation is a security measure that businesses use to protect their customers’ sensitive data during digital transactions. For debit or credit card payments, customers typically provide details such as their card number, CVV, and PIN. The business handling the transaction is responsible for keeping this data secure in its system to prevent theft or data breaches.
Tokenisation helps achieve this by replacing the original card details with a randomly generated combination of data known as a token. This token is stored in the business’s system instead of the actual card information, which makes sure that the customer’s card data remains protected throughout the payment process.
For example, when a person shops online and enters their credit card information on a retailer’s website, the payment gateway uses the tokenisation method to convert the card details into a token. To understand the process better, we can also look at how monthly subscriptions work. When a customer first subscribes, their card details are tokenised and stored. Each month, the service uses the token to charge the card without directly handling the actual card information again.
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How does credit card tokenisation work?
Credit card tokenisation works through a 5-step process, which we have discussed below:
Step 1: Generating the token
When the customer submits their card details, the business’s system first encrypts them and then passes them to the integrated payment gateway. It runs an algorithm that replaces the original card data with a token. The unique quality of a token is that it can not be traced back to the real information. So, even in a severe case of a data breach, where the business’s system faces security issues, the tokens would not have any meaning to access cardholders’ data.
Step 2: Storing the token
The original information gets entirely written over, and only the token is stored in the business’s database.
Step 3: Transaction processing
When it’s time to process the payment, the business sends this token to the payment processor. The processor matches it to the real card data stored previously and then passes the actual details to the card network (such as Visa or Mastercard) to get the transaction approved.
Step 4: Authorising the transaction
The payment processor sends the transaction request to the customer’s bank account. Once it’s confirmed, the response is sent back through the processor to the business.
Step 5: Finalising the payment
The approved funds are transferred from the customer’s bank to the merchant account through the payment processor.
Benefits of credit card tokenisation
Let us now discuss the benefits of card tokenisation from a business’s perspective:
1. Higher Security
With tokenisation, all the sensitive card information gets replaced with a random combination of data, which makes it impossible to trace back to reach the original information. This provides an extra layer of security so the business can protect critical cardholder data from data breaches to the maximum extent.
2. PCI DSS compliance
In the UK, businesses that accept debit or credit card payments must comply with the Payment Card Industry standards. These requirements are implied to protect customers’ cardholder data and make digital payment options secure. Tokenisation is one of the many ways businesses adapt to reach the given standards, which simplifies the process.
3. Improved customer trust
Customers are always concerned about how businesses store and use their personal information. When it implements clear and transparent security standards like credit card tokenisation, it demonstrates the business’s commitment to its customer service quality. This enhances customer confidence in the business and increases long-term loyalty.
4. More efficient business operations
Managing and securing card data can be resource-intensive. Well, credit card tokenisation offloads this responsibility to specialised providers, which allows businesses to focus on their core operations.
Card tokenisation vs EMV technology
Card tokenisation and EMV technology are both critical in enhancing the security of card transactions, but they operate differently and serve distinct purposes in the payment ecosystem.
Tokenisation is designed to secure sensitive card information by replacing it with a token. It can not be converted back into the original card information without accessing the information stored in the secure system known as the token vault.
EMV (Europay, MasterCard and Visa) technology aims to combat counterfeit fraud and enhance the security of in-person card transactions. EMV cards use a microprocessor chip to store and process the data securely. Each transaction generates a unique cryptographic code that validates the transaction. This code may be retrieved using a decryption key.
While card tokenisation enhances the security of digital transactions such as e-commerce shopping, EMV technology comes into play during in-person transactions like POS systems. The choice of implementation will depend on the nature of the business. You can choose either or even a combination of both.
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FAQs
‘Could not tokenise your credit card’ means the process of replacing your card’s sensitive details with a secure token has failed. This could be due to technical issues, invalid card information, or the card issuer not supporting tokenisation.
Credit card tokenisation enhances the security of customer’s card information by converting it into a unique token, thereby reducing the risk of data breaches. It also aids in PCI DSS compliance and protects against fraud.
After the card is tokenised and the token details are stored with the merchant, these token details will be used to initiate online payments instead of the actual card number for processing transactions.
