Tokenization Transactions Explained

Payments Learning Resources

Tokenization Transactions Explained

Tokenized transactions are a vital component in ensuring customer satisfaction and security during the payment process. Payment speed and security is very important for every transaction, whether online or offline.

Why tokenized transactions are a crucial part of the payment process

credit card illustration with a padlock displaying security

Merchants are obliged to offer their customers advanced security measures that will protect their data during the payment process. Credit card tokenization is one of the many solutions that are widely used by merchants to protect their customers from credit card fraud and enhance their payment experience. This article will expand on payment tokenization and the role of tokenized transactions in the payment journey.

What is payment tokenization?

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Payment tokenization involves confidential information, like personal and credit card data, being replaced with a randomly-generated number, known as a token, to protect cardholder data from being exposed and hacked by criminals. Storage of sensitive information may only be done in PCI certified environments, such as via Powercash21. Merchants who are not PCI Level I certified do not have access to the credit card details of a customer as they do not store sensitive information in their payment systems but view transactions as tokens. Without the need to store card data, the PCI compliance scope of merchants is greatly reduced and the responsibility of tokenizing their transactions is assumed by the payment gateways they utilize. Tokens are safely held in the payment processor’s token vault. Tokenization can be applied to the point-of-sale transaction, e-commerce, and mobile or digital wallet transactions.

Tokenized transactions are a necessary step in order to eliminate cardholder data exposure and protect your customers without any requirements from their end. For instance, in payment tokenization customers are not asked to verify their details as it happens in the case of 3D Secure transactions, but the process happens automatically by the merchant’s tokenization service provider. For merchants in industries, where speed of payment transactions without compromising security is vital, such as the travel industry, the importance of partnering with a payment provider offering tokenization solutions is of the essence. Powercash21, a European regulated payment provider, offers payment tokenization solutions to merchants looking to mitigate risk and improve payment security.

The payment tokenization process

credit card on aqua background with security badge overlap

So what does the payment tokenization process entail? When a credit card is used by a customer to perform a purchase, data such as the card’s 16-digit personal account number (PAN), the expiration date and the security code, are all substituted with a unique string of numbers – called a token. The token is then transmitted to the payment processor who is responsible for de-tokenization and authorization of the payment. It’s important to clarify that a token is only ‘readable’ by the payment processor, and not the customer or the seller. If customers use the same card to purchase services or goods from various merchants, a different token will be generated for each merchant service.

Tokenized transactions are beneficial for every merchant who accepts online or mobile payments as it provides benefits such as:

  • Improved User Experience and Conversions: The most dreaded part of an online payment journey for the user is having to enter payment details each time they shop. When repeat customers can opt to store their payment and personal details for future purchases, they are more likely to enjoy the convenience of one-click payments while enhancing their loyalty towards your online store.
  • Increased trust: customers are more concerned than ever about their security during online shopping. If your customers know that their personal and payment information is safe when they shop from your store, they will trust your company and choose you over competitors for future purchases.
  • Lower risk of a data breach: the transition of sensitive data to tokens minimizes the possibility of a data breach. Even if criminals attempt to steal or copy credit card data from a merchant’s server, they will only manage to obtain tokenized information which has no value for them.
  • Internal protection: stealing of data does not only happen by hackers but can also occur from people within your organization. Cardholder information should securely be stored in the form of a token to ensure that is not accessible by your employees, suppliers, vendors, and so on.
  • Lower PCI Scope: According to the PCI Security Standards Council ‘Tokenization solutions do not eliminate the need to maintain and validate PCI DSS compliance, but they may simplify a merchant’s validation efforts by reducing the number of system components for which PCI DSS requirements apply’.

The use of payment tokenization in recurring billing

Companies selling subscription-based services or products can implement tokenization to ‘save’ their customers’ payment data securely in the form of a token. By doing so, merchants will use the token associated with each customer’s credit card details, eliminating the risk of a data breach that might occur in case the customer had to re-enter their payment information on a regular basis. Tokens are ideal for recurring payments as they cannot be duplicated or decoded by anyone apart from a payment processor.

If you are looking for a smooth payment process for your repeat customers, tokenization is definitely the way to go.

Why choose Powercash21’s tokenization services

Our experience in the payments industry along with our expertise in payment processing and risk management solutions renders us a trusted partner in ensuring that data security is ensured during the payment process on your online store.

Powercash21 offers credit card tokenization solutions, backed by its PCI Level I compliant proprietary gateway. Our merchants, entrust the data security of their payment transactions to our technological solutions, which provide them with secure tokens each time a payment occurs. Our tokenization transactions solutions enable users to make purchases on our merchants’ website by entering their payment information once, without the need to put their details every time they make a transaction. This information is then securely stored and transmitted whenever it is necessary for a purchase to be completed, in the form of a token. Find out how Powercash21 can assist you in securing your payment process against potential data breaches.

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