Paying customers have two central concerns, convenience and security. Payment tokenisation has emerged as a key piece of the security puzzle for businesses who want to address both of these essential areas.
Not only does it remove concerns for customers, and help to build that essential trust, but it also offers security and peace of mind for businesses who want to prioritise data security and reduce the risks associated with data breaches and fraud in online environments.
What Is Payment Tokenisation In Business?
Payment tokenisation, in practice, is a data and fraud protection tool. It works by replacing sensitive data like credit card numbers with unique identifiers or “tokens”. These tokens generate a random string of data in place of the original information provided by the customer. This protects sensitive information from falling into the wrong hands.
Payment tokenisation is most commonly found in ecommerce and on other online platforms that process sensitive payment data although it can be used for in-person sales.
How Does Tokenisation Work?
Let’s have a look at how payment tokenisation works in some more detail.
Step 1: Data Capture
When a customer makes a payment, their payment information, like credit card details, are captured by a payment gateway or a point-of-sale (POS) system.
Step 2: Tokenisation
At this point, instead of storing the actual card data, a tokenisation system generates a unique token for the transaction. This token is created to be meaningless to anyone who might intercept it and should bear no resemblance to the original data.
Step 3: Secure Transmission
The information, once disguised, is then transmitted for processing. The actual card data remains safely stored in a secure token vault.
Step 4: Authorisation
The payment processor validates the token, authorises the transaction, and processes it.
During and following this process, the tokenised data is securely stored, minimising the risk of data breaches or misuse.
Step 5: Payment
The business receives payment by communicating the token they have received to the payment gateway or tokenisation partner for payment. This means that businesses are also protected in not needing to store sensitive data themselves.
Where payments are recurring, the same token can be used to identify details and accept payment.
What Are The Benefits of Tokenisation For Businesses?
Payment tokenisation offers huge advantages for businesses, some significant in earning the trust of customers and working partners.
Security
This is at the core of tokenisation and is really crucial to the priorities of modern customers. Those making payments expect to be protected from data breaches and fraud, and tokenisation can play a huge role in this by protecting sensitive data.
This additional security not only benefits customers, but also the business. Secure storage of information negates many of the concerns around data breaches and information storage that can be costly if a business doesn’t get it quite right.
Reassurance
Customers always crave reassurance that their payments are secure. Knowing that their sensitive data is being stored securely can offer peace of mind and help to build trust with the business.
Speed
Tokenisation can be one of the faster security measures available to businesses. It requires little manual input to speed up the authorisation and payment process.
Compliance
Sufficient security is key for compliance. Many government bodies and financial institutions have minimum required levels of security for online card payments.
Payment Card Industry Data Security Standard (PCI DSS) compliance can be complex and costly. Tokenization simplifies compliance efforts by reducing the amount of sensitive data stored. When exploring options, choosing a gateway that is PCI DSS compliant is essential.
Fraud Prevention
Fraud prevention is a huge benefit of payment tokenisation. The tokens are essentially useless to fraudsters if they access them. This removes lots of the headaches and potential admin for both the business and customer if information is ever compromised.
Scalability
Tokenisation is a reliable and scalable security solution for businesses of all sizes. It allows even the smallest businesses to add an extra layer of security for data protection and provides a long-term solution that can grow with the business.
Barriers of Tokenisation
As with any technology, there are a couple of barriers that businesses should be aware of when implementing tokenisation systems.
Firstly, there is a cost associated with a system of this type. In most cases, this cost is much more appealing than the cost of a data breach and is well worth the protection it offers to online services.
Some tokenisation services are more complex than others when it comes to integration and setup. Choosing a system that is simple to install will reduce the time and effort required for the initial setup.
On top of this, it’s important that employees are educated in what tokenization is and what protections it provides. This helps sales teams and customer support assistants to correctly communicate with customers that their data and information is safe and securely stored.
Who Needs Payment Tokenisation?
Payment tokenisation is ideal for any online or ecommerce business, it adds an extra layer of protection and removes a lot of the risk associated with collecting and storing sensitive information in an online environment. This risk reduction can be huge for businesses hoping to dominate sales with an online store.
Similarly, subscription services will see a security benefit when using tokenization services. Being able to reuse the same token to access information simplifies the process without over complicating the process of collecting payment.
For those with brick and mortar establishments, tokenisation can still be useful. Although it’s not as common, tokenisation can add an extra layer of protection to POS systems and in-person sales services.
Finding A Secure Payment Gateway
With all of this in mind, it’s clear that security should be a priority for businesses.
When you choose a payment gateway to support your business online, it’s vital that you understand how and where additional securities are added to protect data and ensure compliance.
Whether you explore 3DS2 security, payment tokenisation, or are looking for a gateway that combines all of these for a well-rounded and secure offering, there are options available to businesses of all sizes.