Tokenisation Payment Explained

Tokenisation is the process of preserving thoughtful data while protecting its business value. This is different from encryption, where precious data is modified and kept safe with methods that do not allow its continued use for business motives. Let’s take tokenisation like a poker chip, while encryption is like a lockbox.

Encoded numbers can be deciphered with the correct key, while tokens, on the other hand, cannot be reversed. The reason is that there is no remarkable mathematical relationship between the token and its original key.

The objective of an efficient tokenisation platform is to move away from any original sensitive payment or personal data from business systems, return each data set with an uncrackable token, and store the actual data in a well-protected cloud environment that’s separate from a person’s business systems.

What Is Tokenisation?

We can start by saying that tokenisation is the process of trading sensitive data for nonsensitive data, and the transmitted data is called “tokens” that can be used in a database or internal system without bringing it into range.

Even though the tokens are unrelated values, they retain some aspects of the original data, commonly length or format, for undisturbed business performances. The original sensitive data is then safely put outside of the organisation’s internal systems.

In general, to “tokenise” a thing means changing it with something else that represents the original but is useless outside a specific condition.

Visualise going to a large carnival and trading in tokens to play games. Each token stands for a certain amount of money, and as long as you are at the festival, you can use the tokens like money for playing ball, video games, or maybe even buying a funnel cake.

How Does Tokenisation Work

Tokens are spontaneously generated in real time during payment, so it doesn’t have to slow down the process.

The customer’s card data is reliably stored, so a trader can use a token to charge following purchases. The important thing here is that a trader doesn’t see or store the credit card number, which secures both the customer’s and the trader’s systems from scams.

Here’s the process:

STEP one

Every cardholder institutes transactions and puts in their sensitive credit card data.

STEP two

The credit card information goes to the trader getting a bank in a token.

STEP three

The acquirer transfers the token to the credit card networks for authorisation.

STEP four

Once permitted, the customer’s data is stored safely in the bank’s secured virtual vaults, and the token gets synced to the customer’s account number.

STEP five

The bank verifies funds and can decline the transaction.

STEP six

A unique token is returned to the trader for current and future businesses if the sanction is successful.

Tokenisation Examples

The tokenisation technology can, on paper, be used with sensitive data of different kinds, not excluding bank transactions, medical records, criminal records, vehicle driver information, loan applications, stock trading, and voter registration. For the big part, any system a substitute may use as a stand-in for sensitive data can benefit from tokenisation.

Tokenisation is often used to secure credit card data, bank account information, and other sensitive data handled by a payment processor. Payment processing use cases that tokenise sensitive credit card information, which include:

1. e-commerce sites;
2. mobile wallets like Google Pay and Apple Pay; and
3. businesses that keep a customer’s card on file.

Tokenisation Benefits

Tokenisation makes it very hard for hackers to crawl their way through cardholder data, as set against older systems in which credit card numbers were stored in databases and traded freely over networks.

The principal benefits of tokenisation include the following:

• It is more compatible with legacy systems than encryption.
• It is a less resource-intensive process than encryption.
• The risk of fallout in a data breach is significantly reduced.
• It also makes the payment industry more suitable by setting new technologies like mobile wallets, one-click payment, and cryptocurrency. This boosts customer trust because it improves the security and satisfaction of a trader’s service.
• It reduces the steps involved in following PCI DSS regulations for merchants.

Let’s go with consumers. It may be that data breaches are inevitable, but if one occurred at a trade where you had used your card, tokenisation would make it much less of an inconvenience.  Trading only the token will never store your card data, and you wouldn’t need to acquire a new card with a unique number. You may not have to provide that new number everywhere you’re using the card for automated payments — utilities, Netflix, Amazon, Uber, and so on.

Final Thoughts

Tokenisation payment is very helpful for traders that accept repeated payments, offer one-click purchases, or quick mobile payments. The method of exchanging actual card data during an exchange is one of the most productive ways of customer data protection; that’s why it is not a surprise that more and more platforms embrace this approach.