August 1st, 2022

Tokenization is not just a buzzword in the digital payments industry. With the multiplication of payment methods available, it is vital to add an additional layer of security to protect sensitive credit card data.

Tokenization is the process that allows protecting sensitive information, replacing it with non-sensitive equivalents, known as tokens. A token itself does not have any value or meaning, it is a reference or identifier that, thanks to the tokenization system, allows you to return to sensitive data. Tokenization is used to prevent data theft in bank card transactions.

When tokenization is activated, an algorithm generates a unique, random value that substitutes the buyer's account number (or PAN number). This random value is the token. These tokens pass securely through the network to proceed with payment without exposing bank card details. The card number is protected in a secure vault.

Chip cards were created to protect banking information at points of sale. Tokenization provides the same level of security for purchases. Both systems prevent data from being stolen.

Payment tokenization creates a random and secure ID, which makes no sense outside the system. There is no correlation between the token and the data it represents. If the user sends his data again, the token will be different. Tokens are generated in real time and used in predefined environments or domains. For example, the same card generates a token for use within a specific environment, and another for e-commerce transactions. Tokenization does not slow down the payment process as the tokens are generated in real time.

Using a token instead of a PAN number to finalize the payment makes it more secure. The seller only saves the token in its database for future transactions. If the database were to be compromised by a hacker, the tokens would not be of any help.

Both tokenization and data encryption serve to protect data online, but they are two different technologies and are not interchangeable. Both systems are always used in transactions in e-commerce stores, to ensure the payment process from start to finish.