Ecommerce and Retail

What Is Credit Card Tokenization?

Credit card tokenization is a security feature that replaces a credit card’s sensitive account information, such as the 16-digit primary account number (PAN), with a unique digital identifier called a token. The token is used in place of the PAN to facilitate a payment transaction, and is only valid for a specific transaction or set of transactions.

Tokenization is a process that helps to secure online and mobile payments by replacing sensitive payment information with a unique digital token, which is a random string of numbers and letters that has no value or meaning on its own. This helps to protect the cardholder’s sensitive payment information from being compromised during the transaction process. Credit card tokenization is used to secure payments made through mobile apps, online retailers, and other digital payment platforms.

How Should Merchants Prepare for Tokenization?

Credit Card Tokenization provides additional security to a cardholder during checkout by using a token to convert their account number and expiration date to a dynamic token verification value. It’s not a simple update, though, but one that requires training for consumers and for merchants in addition to the technology implementation.

Here’s what you should do to prepare if you’re a merchant that accepts credit cards.

  1. Update payment systems – Merchants may need to update their payment systems to be compatible with tokenization, such as by integrating with a tokenization API or modifying their checkout process to accept tokens.
  2. Implement a tokenization system – Merchants will need to work with a tokenization service provider to implement a system that is capable of generating and storing tokens for credit card transactions.
  3. Ensure compliance with Payment Card Industry Data Security Standard (PCI DSS) – Tokenization can help merchants to meet the requirements of PCI DSS, which is a set of security standards that aim to protect cardholder data from being accessed or compromised.
  4. Test the tokenization system – Before implementing tokenization, merchants should test the system to ensure that it is working properly and that all transactions are being processed correctly.
  5. Train employees – Merchants should make sure that their employees are trained on how to use the tokenization system and how to handle tokens and other sensitive payment information.

What Credit Card Tokenization Services Are Available?

Each of the major credit card brands (Visa, Mastercard, American Express, Discover, and JCB) offers its own tokenization service to help secure online and mobile payments. Here is a brief overview of the tokenization services offered by each credit card brand:

  • Visa: Visa Token Service (VTS) is a security feature that replaces a cardholder’s sensitive account information with a unique digital token to facilitate secure online and mobile payments. Visa has integrated with Google Chrome to introduce VTS to web browsers for card-not-present transactions.
  • Mastercard: Mastercard Digital Enablement Service (MDES) is a tokenization service that replaces sensitive cardholder data with a unique digital token to secure online and mobile payments.
  • American Express: American Express tokenization service is called SafeKey, and it replaces a cardholder’s sensitive account information with a unique digital token to secure online and mobile payments.
  • Discover: Discover’s tokenization service is called Discover Tokenization, and it replaces a cardholder’s sensitive account information with a unique digital token to secure online and mobile payments.
  • JCB: JCB’s tokenization service is called JCB Tokenization, and it replaces a cardholder’s sensitive account information with a unique digital token to secure online and mobile payments.

Each of these tokenization services is designed to help secure online and mobile payments by replacing sensitive payment information with a unique digital token, which is only valid for a specific transaction or set of transactions. This helps to protect the cardholder’s sensitive payment information from being compromised during the transaction process.

This process is helpful to all of the parties that participate in a transaction. The merchant doesn’t have to ever store credit card data so their systems are far more secure. The consumer is in full control over their tokens and can disable them at any time. And the payment processor avoids the fraudulent transactions associated with stolen credit card numbers.

Douglas Karr

Douglas Karr is the founder of the Martech Zone and a recognized expert on digital transformation. Douglas has helped start several successful MarTech startups, has assisted in the due diligence of over $5 bil in Martech acquisitions and investments, and continues to launch his own platforms and services. He's a co-founder of Highbridge, a digital transformation consulting firm. Douglas is also a published author of a Dummie's guide and a business leadership book.

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