A Guide to Payment Tokenization
As the global economy shifts to digital currencies and transactions, the concern for payment security is at an all-time high. The increase in new revenue streams requires a system of securing financial information. To keep cardholder information safe, a multi-pronged approach to data security is necessary, combining EMV, encryption, and tokenization.
Tokenization is a best practice that replaces Cardholder Data (CHD) like credit card information with one or more unrelated symbols it generates randomly or by algorithm. The result is an additional layer of unbreakable protection that is ensured by the useless nature of the information to outside parties without the original cipher key.
In this guide, we discuss what tokenization is all about in greater detail, including:
- What Is Tokenization?
- How Does Tokenization Work?
- How Is Tokenization Different Than Encryption?
- Benefits of Tokenization as a Part of a Comprehensive Security Bundle
- Tokenization and PCI Compliance
- Protecting Card Data and Reducing Fraud with a Multi-Pronged Approach to Security
What Is Tokenization?
Tokenization is a process by which sensitive information can be protected from others who do not have the proper authorization to view or manage it. The payments industry uses it to protect the Primary Account Number (PAN) of a card by replacing it with a unique string of characters.
Tokenization enables safe online transmission of digital transactions that cannot be duplicated because each token is completely original and is useless to an attacker if compromised. This is very much like a virtual version of the way the EMV chip in a card prevents unauthorized use of a fraudulent copy at a physical location by referencing the code found on the embedded tech for verification.
To fully understand what tokenization is, it’s necessary to know what the tokens used in this system are and why they’re such an exceptional security measure.
The unique string of characters that comprises each individual collection of information in the process of making a digitized payment is exclusive to each specific independent software vendor (ISV) and consumer. The identifying string is the token that represents secured data so that the sensitive data does not need to be placed in a vulnerable location or sent along channels that could be compromised.
Data remains secure because it’s in an unusable state for anyone not holding the original key. Since each of these tokens is generated in real time at the moment of origin online, it’s an automatic system that also requires little hands-on management for it to work seamlessly.
How Does Tokenization Work?
When customers make a purchase, it ends with them entering their card details and personal information that they wish to provide only for the intended transaction and that they expect to be kept confidential.
Tokenization occurs once the data is entered. A token is instantly generated, which will represent the customer’s information for card-on-file or recurring billing transactions if the credentials are saved on the system. Some cases will create a new token each time if the individual is operating without a tether to a logged account.
Businesses with a base of repeat customers find mobile payment tokenization especially convenient in allowing purchases and refunds with a single click or none at all. The ease of use this enables is very appealing to customers who want the best security but don’t want to go through an arduous process every time they need to check out.
When this is an integrated part of the platform suite, the API gateway is already configured to recognize this traffic and establish the proper connections to mitigate any potential latency. The data only needs to be entered a single time, and tokens will be the only information revealed at any given time thereafter whenever a transaction is requested. The tokenized data can be reused for future transactions wherever the data will be recognized. This allows for flexibility in use across multiple environments, including ecommerce, card-on-file, and recurring transactions.
Tokens are held in a secured digital vault where they can be recalled as required for independent events without concern for additional exposure or risk of actual identifiers being displayed. Tokenized data cannot be reconstructed and does not contain Sensitive Authentication Data (SAD), rendering the data useless to an attacker if compromised.
How Is Tokenization Different Than Encryption?
While tokenization replaces sensitive data with a token, encryption encrypts or encodes the data so that it’s only hidden until the code is broken or decoded. The goal of this type of measure is aimed at making the information so well-hidden that it cannot be discovered.
End-to-end encryption, also referred to as data field encryption, is the method of encoding data at the entry point and then transferring it to finally be decrypted at its destination.
Tokenization and encryption both have valuable security applications for protecting data whether being transmitted or stored.
Benefits of Tokenization as a Part of a Comprehensive Security Bundle
Tokenization, as part of a multi-pronged approach to security, offers benefits to everyone involved.
Benefits for Developers
Tokenization is a solid foundation for further development in security measures. The success of the token system opens new possibilities for developers to build upon the proven architecture for added security and scalable infrastructure in future systems and networks.
Developers are creating the internet of tomorrow with the platforms they encode today that support the use of payment tokenization for e-commerce going forward into the future. There is ample opportunity for developers to provide added security measures with a multi-pronged approach that includes tokenization.
Benefits for ISVs
Tokenization drives innovation because the tech behind it is an integral part of how things are bought and sold. It’s the standard for credit card transactions around the world, and an integrated payments system can adapt to sudden changes from emerging technology that an ISV is unaware of. With an integrated payment solution, the lengthy wait and slow changes are all in the past because policies and adjustments to the network can be made much more quickly by eliminating the third party.
This is only a very brief number of possible benefits to using an integrated system that can be managed in-house by an experienced payment processor like Global Payments Integrated. The available features and functions of our services cut out unnecessary steps and inefficient practices to simplify transactions and enable greater functionality. Some common tasks that call for payment flexibility that tokenization completes with ease are refunds, recurring fees, automatic payments, and more.
Tokenization is a foundation of modern e-commerce that’s employed by every major market operating within the digital sphere for transaction processing. Payment technology in development today has this modern structure as its core design influence to facilitate seamless integration. Its widespread application is improving the user experience on a myriad of new devices by making them easier and safer than ever to use for making payments, including:
- Secure in-store point-of-sale acceptance
- Payments on the go
- Traditional e-commerce
- In-app payments
Benefits for Merchants
The tokenization system is ideal for handling large volumes of transactions with lower overhead than traditional alphanumeric strings.
The appeal for a small or midsize business is to attract new clients who are looking for a company that is current with best practices on keeping transactions secure with the latest tools. The attention given to this one detail can have a profound effect that bolsters confidence in business acumen for potential customers while simultaneously granting the company peace of mind. Since tokenization easily scales to meet the need, there is never any concern that it must be rebuilt because it has been outgrown.
Tokenization and PCI Compliance
PCI DSS stands for Payment Card Industry Data Security Standard, and it is what digital transactions must adhere to in order to meet the quality of service requirements governing their information safety. The more places the information is exposed or in contact with increases the scope of PCI compliance because it must be qualified at each location. This affects the efficiency of the entire process and increases the cost of maintaining a qualified network.
Tokenization helps limit scope by replacing the sensitive data with a neutral representative symbol or string of characters shielding both the merchant and payment solution from storing sensitive cardholder data. Although this does not ensure PCI DSS compliance from end to end, it does provide significant scope reduction for merchants undergoing PCI-DSS validation. When the compliance process is less complicated and lengthy, it provides a measurable return in the asset of time, which any business can appreciate saving.
The PCI DSS sets forth guidelines including six major points of focus where compliance standards must be satisfied:
- Maintain a securely built network
- Protect cardholder data
- Actively manage vulnerability
- Control access with strong authentication
- Monitor and regularly test networks
- Enforce information security by policy
A breakdown of all the specific principles of PCI DSS can be found in our related blog article covering the areas where adherence is examined. One of the basic tenets to remember for proper compliance is to limit the storage of cardholder data as much as possible to eliminate unnecessary risk and decrease scope.
To help understand exactly what to do, we’ve curated a catalog of resources that provide insight into the do’s and don’ts to follow for PCI data storage.
Protecting Card Data and Reducing Fraud with a Multi-Pronged Approach to Security
The most effective method for keeping information safe is a multi-pronged approach combining EMV, encryption, and tokenization.
EdgeShield from Global Payments Integrated is a security bundle that helps protect credit card data, prevent counterfeit fraud, and enhance payments security. Our fraud-reduction technology is designed to protect against losses due to the use of counterfeit and stolen payment cards.
Our EMV solutions ensure that chip technology is virtually impossible to duplicate. The technology helps insulate developers from complex device driving and card brand certifications via components such as:
- End-to-end encryption — Designed to render cardholder data unreadable, encrypted at the device.
- Token vault — Cardholder data is replaced by digital “tokens” and is stored in the secure Global Payments Integrated vault, rather than the merchant environment.
- PA-DSS 3.0 Out-of-Scope — Payment applications are rendered out-of-scope with EdgeShield, eliminating cumbersome PCI validation requirements.
- PCI Assure — Our PCI Assure program helps merchants simplify PCI compliance with tools such as self-assessment questionnaires, network scans, a breach reimbursement program, and custom security profiles.
The best method to implement for mitigating the risk of a data breach is one that actively utilizes all of the best measures that are currently proven to provide superior protection, like those from Global Payments Integrated. The compliance process for meeting all the criteria set forth in the PCI DSS can be complicated, but our resources are specifically designed to simplify the process so that ISVs and merchants will have no trouble in determining the right steps to take.
To learn the possibilities within your reach, contact Global Payments Integrated for more detailed information on what we can do for you today.
Originally published at https://www.globalpaymentsintegrated.com.