Credit card scams are more of a common thing now. Every year thousands of such incidents are reported. Thus to improve credit card security, measures like credit card tokenization have been taken.
It is a good initiative, but only a few customers use it, compromising the security of their cards. Either they must be aware of this term or know how tokenization makes credit card info secure. Whatever the case, your credit card security remains at stake.
Therefore this blog covers the basic concept of credit card tokenization, its benefits and its importance. If you want to update your credit card security knowledge, read this blog.
What Is Credit Card Tokenization?
The term tokenization is similar to the term OTP- One Time Password. Tokenization is the process of generating a unique code for credit cards. A unique code known as a token is used for transactions every time instead of the credit card`s 16-digit number.
This process ensures secure payments processing. Even if you make recurring payments to the same vendor, they can not keep track of or store your card data.
How To Generate Tokens?
Generating unique tokens for your credit cards is effortless; you can generate a unique token ID within seconds. First, you must sign in to your payment APIs, i.e. Google Pay or Apple pay. The next step is to request your payment API to generate a unique token. The token generated is submitted to the merchant or payment terminal.
The payment processor then passes the details to the card acquirer to verify the token. The credit card acquirer, i.e. Visa or MasterCard, verifies the token from your issuing bank. You get a notification on your phone if the bank approves the token.
What Are The Benefits Of Tokenization?
Tokenization is a step forward in ensuring credit card security for sure. Still, you might wonder. What are the benefits of using a unique token rather than initiating the transaction with an existing credit card number?
Before asking this question, there are several things you must consider. The machine accesses the data when a card owner initiates a transaction at a credit card processing machine. And the processor saves the details on that card in its database.
When the processor stores your data, the merchant has direct access to your data. And it is at stake and can be hacked easily. But when you process your transactions via a unique token. The merchant doesn’t know anything about your card info, i.e. PAN, CVV, address Etc.
However, the biggest benefit of tokenization is the security of your credit card. The tokenization provides 3D security, ensures virtual protection, and prevents unauthorized access to your card info. Besides security, the other benefits of tokenization are that it fosters customers’ trust and paves the room for payment innovations.
What Are The Requirements To Enable Tokenization?
Customers must install a payment API on their phones. And integrate their credit card with that API, i.e. Google Pay, PayPal Etc., to enable tokenization. However, credit card merchants need to ask their payment gateway providers for this feature. Overall, enabling credit card tokenization for customers or merchants is an easy two-step process.
How Impactful Has Tokenization Been So Far?
The concept of tokenization is two decades old and was first introduced in 2001. As time passed, the world realized the significance and importance of tokenization and switched toward it. Since then, it has helped numerous customers to avoid being the victims of credit card scams.
As per the reports of PCI, tokenized cards are far more secure than untokenized cards. The untokenized cards are more prone to scams and an easy target for scammers and phishers. Thus, if you seek secure credit card processing services, enable tokenization immediately.
Tokenization VS. Encryption- Which Is Better?
Encyrtpyion plays its role in protecting credit card info, but one can not entirely rely on encryption. Encryption is less secure than tokenization because there remains the risk of decryption. Moreover, it is easier to breach the encrypted credit card data than tokenized one. For instance, the magnetic strip, pin, chip, and CVV have their roles in encryption. And all of these security measures are prone to manipulation. In contrast, tokenization is secure unless the card owner doesn’t reveal the token number to someone.
Thus, if you have encrypted cards, still use tokenization because it’s additional security and prevents you from increasing card scams.
Does Tokenization Prevent All Scams?
If you have enabled tokenization, it can prevent most scams, but it doesn’t mean you can never be scammed. You get exposed to scams if you don’t follow security measures and are careless regarding protecting your privacy.
If someone sneaks into your phone, it’s easy for them to receive tokens on your behalf and proceed. In this case, even the best online payment system can not detect who is initiating and processing the transactions.
Therefore tokenization is the best security measure when someone takes care of other miscellaneous security measures.
Wrap Up
In this era, no one can deny the importance of tokenization as far as avoiding credit card scams are concerned. If someone owns a credit card, it is mandatory to enable tokenization. Otherwise, people must find out when and where scams await them.
However, this blog gives a complete overview of credit card tokenization and its benefits. If you need to learn what credit card tokenization is, this blog helps you to understand these terminologies clearly.