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Card Tokenization - 4 Methods to Use This Tech - Helcim

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Ryleigh Stangness | June 15, 2022

“Credit card tokenization is the process used to create a token to represent a customer's credit card, this token is an alphanumeric string of characters that”
6 min read

It's been a slow morning at the shop. Linda, who picks up her weekly order every Tuesday, brings the energy of a sunny Saturday with her as she buzzes through the door.

Despite the frantic tangle of her red curls and mismatched earrings, she is not typically one to lose things.

That's why you're surprised to learn her credit card information has been stolen, and she is fighting thousands of dollars in charges.

The card information was not leaked from your transactions, thank goodness- probably due at least to your card tokenization technology and fraud defenses, but it does leave you feeling jarred, a little too close to home, you could say.

Linda leaves with a gracious smile hollering over her shoulder for her rugrats to catch up.

As the door chimes fade, you're left wondering, "how does tokenization work anyway?" And which payment methods use card tokenization.

In this blog, we'll answer those key questions and give you a few tips for keeping your customer information secure.

What Linda didn't know

Everyday customers like Linda trust businesses like yours with their payment information. They entrust businesses to follow security standards like PCI compliance, and take reasonable precuations against fraud and security breaches.

As a business owner, you are aware and cautious that you're processing sensitive data, and you want to educate yourself to learn more about how things like this happen so you can protect your business and customers like Linda from undue stress and havoc.

Card tokenization is one of the biggest defenses businesses like yours can protect customers like Linda when they make a purchase or store their information in a customer profile.

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What is credit card tokenization?

Credit card tokenization is a process of essentially "cloaking" your customer's card information with a randomly generated series of letters and numbers or an alphanumeric string of characters called a "token" that can only be decrypted by the bank when processing a transaction.

This process of payment tokenization allows you to safely store credit card tokens for future use instead of the sensitive card information so hackers have no way of using Linda's card for fraudulent purchases.

Here are four payment methods your business probably already offers that can be tokenized:

  • Credit card vaults
  • Subscriptions and recurring billing
  • E-commerce checkouts with saved payment information and customer profiles
  • Contactless payment methods such as mobile wallets that use Google Pay and Apple Pay

By using tokenization, if your phone is stolen or hacked, your payment information associated with Google or Apple Pay is not compromised. You might be surprised to learn you already be using tokenization in your personal life for things like your monthly gym membership or loading your payment information to your phone for in-app payments.

So how does tokenization work? Watch our video below where we explain what this process looks like.

How does card tokenization work?

Once a credit card is tokenized in your payment processor's system, it can only be used within that system and your business's merchant account. The token is unique to each processor and method, making them useless to hackers.

As a business owner, your credit card processor is responsible for storing your customers' credit card information securely and encrypting the data so it cannot be used by anyone who is not authorized. Credit card tokenization is used so that instead of storing whole credit card numbers on your business's website or system, you are instead storing a token.

How tokenized payments benefit your business and your customers

The businesses who accepted those transactions from Linda's stolen card credentials may be liable for chargebacks and have to pay out of pocket. Not to mention the hassle Linda had to go through to cancel her cards and update all her payment information- just this morning, her Starbucks card was not automatically preloaded for her coffee as usual and she missed out on double the points.

All that to say that credit card tokenization helps your business by keeping your customer information safe and guarding your transactions against security breaches and fraud. If Linda is happy, you're happy.

Plus, It helps you remain PCI compliant while creating convenient payment avenues that allow more accessible ways to let your customers pay.

Storing tokenized payments means faster, flexible, and even remote payments such as:

  • Mobile or contactless payments
  • Recurring billing and subscriptions
  • Deposits and installments
  • Invoices
  • Returning customers both online and in-person

You'll retain all the benefits of storing customers' credit card information for quick and easy payments without the headaches and liability of storing whole credit card numbers.

What if our tokens are stolen?

In other words, what is the risk of card tokenization failure?

Well, first of all, you can have peace of mind knowing you are in a much better position to protect your customers' information using a tokenization service when it comes to credit card theft.

But, more than that even if the token is hijacked, the way that tokenization works mean that unlike when a credit card is stolen, they wouldn't be able to extract credit card numbers and use them. Your credit card tokens are useless to hackers because they cannot be used anywhere outside of your merchant account and within your merchant account dashboard.

By default your customer's credit card information should be securely stored in a card vault on a secure server similar to what Helcim does. You can safely store the credit card token on your database because it is simply an identifier for the stored credit card. We can use the same analogy for our imaginary character, Linda. Her customer credit card information has been tucked away in a sort of credit card witness protection system. No one knows what or who they're looking for, and they have no way of getting any information or clues.

Here's a neat fact: Tokens can be disabled, so even when hackers get into an app or website, and even if they get all of these random indecipherable tokens, these can be rendered null and disconnected from your card information. Each business or payment method will have a unique token, so you don't have to cancel credit cards or change your billing information if one business, app, or website is compromised.

Not all heroes wear capes: Make tokenization your superpower

Tokenized payments are convenient and secure and give your business and customers the flexibility to pay more quickly. They increase your security and can help your business to remain PCI compliant. Plus, you'll save your customers the headaches of compromised or stolen credit card information and canceling their cards.

You couldn't save Linda from her Friday morning on the phone with her credit card company, but you can make sure it won't happen again- atleast not from your store. Not only do your customers benefit from credit card tokenization, but so do you.

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FAQs

Could a token be hacked by reversing it?

The token is not like a Rubix cube that has been mixed up. It is a brand new sequence; the numbers do not correspond to bank card details or mean anything to anyone except the merchant.

Does Apple Pay have tokenization?

Yes. For example, it is safe to load your payment information onto Apple or Google Pay for your phone. When you upload your debit or credit card information or take a picture of your card, your phone will verify the payment information with your bank and generate a random token. This tokenized information is what is loaded on your phone. When you go to pay, Apple or Google pay, use your FaceID, thumbprint, or passcode to decode the tokenized information and send it to the card reader to pay.

How are tokenized payments used for E-commerce?

The first time you shop at a new online store, you'll be asked to enter your payment information or pay with another method such as Apple Pay or Paypal. If you enter your card details, there may be an option to save your card details to your customer profile for easier and faster checkouts next time. If you choose to "save" this information, it won't actually save your card numbers. Instead, it will generate a random token unique to this merchant. The merchant will usually use a card vault to store the tokenized information.

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