According to Finder, there were 2.7 million cases of UK credit and debit card fraud in 2023. Alarming, right? This statistic alone is enough to scare your customers from entering their card information for your product or service.
But for every problem, there lies a solution. Credit card tokenisation has helped businesses to address the concern around this issue. But what is credit card tokenisation, how does it work and what are its benefits for your business? Let’s find out.
What is credit card tokenisation?
Credit card tokenisation is a security measure that swaps out sensitive card details for a unique, randomly generated code known as a token. This token, which only has relevance within the particular transaction or system it’s associated with, ensures that your customers’ card information remains secure and hidden during the payment process.
Examples of credit card tokenisation
The first example is that of online shopping. When a person shops online and enters his/her credit card information on a retailer’s website, the website’s payment gateway uses a tokenisation service to convert the card details into a token.
The second example is that of mobile payments through means like Google Pay.
The third example is paying digitally for services like Netflix and Spotify. These brands use tokenisation for recurring billing. When a customer first subscribes, his/her card details are tokenised and stored. Each month, the service uses the token to charge the card without ever handling the actual card information again.
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How does credit card tokenisation work?
Credit card tokenisation works through a 5-step tokenisation flow process.
Step 1 – Token generation:
When the customer enters their credit card details during a transaction, the merchant’s system encrypts it and sends this information to a tokenisation service which generates the token.
Step 2 – Token storage:
The token is sent back to the merchant who stores it in their database. The original card information is securely stored by the tokenisation service provider.
Step 3 – Transaction processing:
The token is sent by the merchant to the payment processor which maps the token back to the original card data. At the same time, the tokenisation service provider sends the actual card data to the payment process which is forwarded to the appropriate card network e.g. Visa.
Step 4 – Authorisation:
The transaction is forwarded to the issuing bank which approves the transaction. It’s then sent back to the payment processor from where it reaches the merchant.
Step 5 – Payment finalisation:
The funds get transferred from the bank to the merchant’s account through the payment processor.
Impact of credit card tokenisation on customers
Credit card tokenisation greatly enhances the security of customer’s financial information which reduces the risk of data breaches and fraud. This allows customers to shop with confidence, knowing their information is protected.
Additionally, it ensures a smoother and faster checkout experience, as it allows for secure storage of payment details for future transactions.
Benefits of credit card tokenisation
You’ve seen the benefits of a tokenised credit card for the customers. But what are the advantages of tokenisation for the business?
1. Enhanced security
Since tokenisation replaces sensitive card data with a token, it becomes meaningless if intercepted by cybercriminals. This significantly reduces the risk of data breaches which protects the business from reputational damage.
2. PCI compliance
Storing credit card details necessitates strict adherence to PCI which can be complex and costly. By storing tokens instead of card data, businesses can simplify their compliance requirements and reduce the associated costs.
3. Improved customer trust
We shared a startling statistic at the start of the article. Customers are always concerned about the security of their financial information. When you implement tokenisation, it in fact demonstrates your commitment to safeguarding their data. This enhances customer confidence and loyalty.
4. Streamline operationsManaging 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 your nature of 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.
