Updated: Jun 22
Does data security keep you up at night?
If so, you’re not alone. Ensuring strong credit card security is crucial in today's digital world for both customers and businesses. It safeguards sensitive personal information and protects against potential financial loss and identity theft. When customers see a business's commitment to stringent credit card security and their safe transactions and data, it builds trust and strengthens its reputation.
Imagine a solution that could alleviate worries and improve cybersecurity. Enter tokenization–the approach many organizations are moving to as they move away from data encryption.
Why? It's all about reputational risk – or protection – in today’s age of cybersecurity.
What Exactly Is Tokenization?
Tokenization is a data security technique that replaces sensitive information, such as credit card numbers or personally identifiable information (PII), with unique identification tokens.
The original intent of tokenization was to prevent merchants from storing credit card information on their servers, where anyone with access could potentially view or abuse customer credit card numbers.
Tokens are really just placeholders and have no value or meaning outside of the tokenization system.
The last four digits of the credit card number are preserved in the tokenized version; however, the remaining numbers are random. The token is now secure enough to be stored in the database, rendering it useless for anyone who gains unauthorized access.
Tokens must be mapped back to the original data (e.g., a credit card number). A trustworthy third party typically performs this mapping.
Finding the right tokenization provider can make all the difference by granting you control over your tokens, providing redundancy measures, reducing your Payment Card Industry (PCI) scope, and raising your security standards.
Which Data Should You Tokenize?
Safeguarding credit card numbers is a requirement set by the Payment Card Industry Council (PCI), and tokenization plays a vital role to meet this requirement effectively.
However, there are numerous scenarios in which tokenization can assist an organization in securely storing sensitive data. Consider the term "personally identifiable information," or PII. HIPPA and the General Data Protection Regulation (GDPR) require that personally identifiable information be anonymized and stored. Tokenization is a smart choice for businesses that need to save any sensitive information, such as:
Social Security cards
Bank account information
License plate numbers
Credit card information
Date of birth
Gender or ethnicity
In this blog, we focus on the aspects of tokenization as it relates to credit card data.
Reversible and Irreversible Tokenization
Reversible tokens can be converted back to their original values. They can be further categorized as:
Cryptographic tokenization, which uses strong encryption to generate tokens
Non-cryptographic, which involves randomly generating tokens and storing the data in a database
Irreversible tokens can't be converted back to their original values. They are often used for making data anonymous for analytics.
Exploring Different Types of Tokenization
When it comes to PCI tokenization, there are three key types to consider:
Payment service tokenization
Gateway Tokenization to Simplify eCommerce Payments
If you run an e-commerce site, odds are you accept payments through a payment gateway. Most gateways have technology that allows you to save credit card information to their system and receive a token in return.
For subsequent transactions, your system sends the token to the gateway, eliminating the need to store credit card data internally.
The disadvantage is that each gateway has its own token schema, which limits your flexibility to use a different gateway. In addition, switching gateways can be expensive and time-consuming as you will need to de-tokenize and migrate your customers' data to your new processing gateway. And some gateways may not even support such migration.
Highly Versatile Pass-through Tokenization
The pass-through tokenization model can connect to most Application Programming Interfaces (APIs). Independent tokenization providers have developed proprietary technology that sits between your e-commerce site and the gateway. You can use your existing gateway integration code with these pass-through tokenization providers; no additional storage is required.
Pass-through tokenization is a step above gateway tokenization. It allows payment solutions to route transactions to different gateways in real-time, avoiding costly and time-consuming card data transfers between payment platforms.
An additional benefit of this tokenization type is that it offers flexibility. For example, unlike gateway tokenization, you can use it for purposes other than credit card payments.
Payment Services Tokenization For Complex Payment Requirements
For businesses with more complex payment requirements, payment services tokenization is an ideal choice. This model provides a single API that, once integrated, allows routing payments to multiple gateways. This approach is especially beneficial for businesses operating in different regions, managing multiple currencies, or working with various processors and gateways.
The payment services model has the disadvantage that existing gateway integration codes cannot be reused; however, the payoff is frequently worth it.
A payment services tokenization model has some distinct advantages in addition to reduced PCI scope and increased security. The payment services model simplifies your integration code and prevents payment gateways from controlling your tokens. In contrast to gateway tokenization, you can use a third-party company's token on any supported gateway. On the other hand, you cannot use tokens provided by payment gateways against a competing alternative gateway.
Encryption Versus Tokenization
The primary distinction between encryption and tokenization is that encryption uses a 'secret key' to encrypt and decrypt data, whereas tokenization employs a 'token.'
Encrypted data remains reversible and is, therefore, a significant issue. Encryption makes it difficult to access the original data, but not impossible. All encryption is essentially breakable. The strength of your algorithm and the attacker's computational power will determine how easily an attacker can decipher the data. Thus, encryption is data obfuscation rather than data protection.
Because encrypted data is reversible, the PCI Security Standards Council and other compliance organizations consider it sensitive data and must be safeguarded.
Data tokenization, unlike encryption, cannot be reversed. Rather than using a breakable algorithm, a tokenization system replaces sensitive data with random information, rendering the token useless. The token is merely a placeholder with no inherent value.
The original data is not introduced into your IT environment. Instead, the actual data resides in a secure offsite platform.
Tokenization reduces business risk and does not require the same level of protection as encrypted data.
More Kudos for Tokenization: Enhanced Security and Trust
Tokenization offers several compelling advantages for protecting sensitive customer data:
Increased customer assurance – Tokenization adds an extra layer of security to eCommerce websites, increasing consumer trust.
Enhanced security and breach protection – Businesses use tokenization to avoid capturing sensitive information in their systems and databases. Businesses can reduce security breaches by preventing the storage and transmission of data.
Improved patient security – Organizations can use tokenization solutions for HIPAA-covered scenarios. Healthcare organizations can better comply with HIPAA regulations by substituting a tokenized value for electronically protected health information (ePHI) and non-public personal information (NPPI).
Increased credit card payment security – Tokenization aligns with the stringent standards and regulations of the payment card industry. Using tokenization solutions enables businesses to easily comply with industry standards and protect client information to safeguard cardholder data, including magnetic swipe data, primary account numbers, and cardholder information.
Future Tokenization Trends and Developments
Tokenization is the future of payments, especially as methods like mobile payments and IoT devices gain popularity. Tokenization provides an extra layer of security, ensuring your payment transactions are safe from fraudsters.
Although there are challenges with future tokenization implementations, particularly with scalability and interoperability, solutions are within reach.
Innovative approaches like blockchain integration and standardized tokenization frameworks offer promising solutions for seamless implementation and widespread adoption.
Conclusion: Elevate Your Data Security With Tokenization
Tokenization is no longer an option; it is necessary for security and compliance reasons alone. The truth is that the security requirements of online payments are difficult to meet on their own. If your business accepts online payments, you may be a target. Startups, in particular, frequently choose to trade security for speed to market. Using security and tokenization experts will save your company time and money in the end.
Don't let data security concerns keep you up at night. Take the proactive step towards revamping your data security strategy and follow these best practices:
Select a tokenization partner who is unconcerned about payment gateways or card brands
Look for tokenization that you can add with minimal integration effort
Look for a provider combining multiple gateways, methods, and services into a single integration
Ready to Revamp Your Data Security?
At U.S. Transactions Corp, our team of experts can guide you through achieving PCI compliance each step of the way. We’re on board to help you protect your customers’ information and reputation.
UST works side-by-side with you to bring your security vision to life, protecting the data of your valued customers – and your reputation in the industry.
About the author
U.S. Transactions Corp., a premier B2B enterprise service provider, collaborates with its clients to deliver an exceptional experience every time, from industry-lowest rates and cutting-edge technology to Level-3 processing that can save your organization up to 30 percent on costs! Since 2009,
UST has been a trusted source for Associations,
Nonprofits and Enterprises looking to maximize their success rate through superior payment solutions designed specifically for them.