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Understanding More About Tokenized Payment Systems

Understanding More About Tokenized Payment Systems
Understanding More About Tokenized Payment Systems

It is quite possible that many of us might have come across the term token payment systems. However, it certainly is a very recent term and has been around only for a couple of years. Though it is being used for making credit and debit card payments, there is still research going on in an effort to iron out and correct some grey areas. In this article, we will try and learn something more about tokenization so that our readers and other stakeholders are able to get the right knowledge and information about the same.

When we talk about Pii tokenization, we are referring to a process through which important and sensitive information is handled carefully. In other words, the sensitive data is replaced with a set of characters which are not readable and understandable to the outside world. However, the best thing is that all the essential information that is required for processing the payment is available in this encrypted set of characters. Hence, this goes a long way in processing payments at the POS or POP without compromising the data security in any manner whatsoever.

What It Actually Means

When we look at tokenization in the payment space, we are talking about a method by which the 16-digit Personal Account Number of PAN of the customer is replaced with a token. The token is basically a unique set of characters which is heavily encrypted.  As mentioned above, it does not make any sense to those who come in contact with the tokenized number. Hence there are many experts who believe that it could be a secure and safe way for customers to make payments using debit or credit cards.

How Is It Different From Encryption

hough tokenization could be an extended form of encryption, there are some obvious differences that we need to consider. Encryption uses reversible algorithms that are cryptographic in nature. This method is still being used for protecting sensitive data. However, unlike encryption, tokenization replaces sensitive information of cardholder details with a stand-in token. To make things clear, unlike encryption there is no reversal of data or information that moves through in an encrypted state. This is where tokenization scores over encryption. The tokenized information remains tokenized on a permanent basis and therefore the chances of data penetration and pilferage are reduced quite significantly.

Different Types Of Tokens

There are basically two types of token, tokens preserving formats and tokens that do not preserve formats. In a format preserving the tokenized system, the 16-digit credit or debit card number is maintained but it is available in a tokenized format. When we talk about a nor format preserving token, the format does not resemble the original credit or debit card number and it could have a combination of both alpha and numeric numbers.

How Will It Impact Online Business?

There are reasons to believe that credit and debit card tokenization will go a long way in improving data security through the entire process of data capture to storage. The reason is simple. The credit and debit card numbers and other details are not stored anywhere. However, there are some grey areas and the same are being addressed and it will not be long before it becomes a completely fool-proof system.

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TokenEx, LLC

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Edmond, OK
Phone: 877-316-4544