Does your business accept credit cards? If so, then you need to know how to protect sensitive credit card information with payment card tokenization.
Without proper data security, your business could be an easy target for credit card fraud.
In fact, the US Federal Trade Commission reports that 40% of all financial fraud is related to credit cards, resulting in over $3 million in lost information each year.
Fortunately, tokenization technology exists to help combat credit card fraud, protect customer data, and vastly improve business security.
What is Tokenization and How Does It Work?
Tokenization of data is a protective process that utilizes advanced payment software to secure sensitive credit card data. Tokenization takes credit card information and substitutes it with a unique token which is only decipherable with the proper tokenization system.
Most credit cards come with a 16-digit account number.
When a customer swipes a credit card, the account number is automatically replaced with a random number, or token.
For example, 1234-5678-9012-1234 is tokenized to become 5gh%#sDf8*kL2%fH. Businesses will never see the original credit card number. Instead, only the tokenized data is visible in the payment system.
Tokenized data is completely different from the original credit card information and acts as the key for all future transactions. Businesses can use this unique token to store customer records.
The token is only decipherable by the payment processor. Even if a hacker gains access to this data, the information would not be comprehensible.
The Evolution of Tokenization
In the past, businesses used a process called encryption to secure data.
Encryption simply rearranges data when a card is processed. Then, the data is decrypted back to its original form when the payment is authorized and reaches the business.
However, encryption only masks the original data and continues to store it on the server. If a hacker obtains the decryption key, they will gain complete access to all credit card information.
In 2005, tokenization technology was developed by Shift4 Corporation as a more advanced way to secure sensitive payment card data.
Unlike encryption, tokenization completely removes the credit card information from your network. Future transactions are completed with a token instead of the original data.
Tokenization is now being used more frequently by businesses because it is more secure and cost-effective than other security methods, such as encryption.
Why is Tokenization Important for Data Security?
The average cost of a data breach is $4 million, according to IBM Security. That is approximately $158 per lost or stolen record.
While credit card fraud is still a possibility, tokenization of data helps keep credit card information as safe as possible. Businesses can safeguard against fraudulent activity by utilizing payment gateways that implement tokenization security.
Additionally, tokenized data is never stored on your system. Many processors store data off-site in a secure, cloud-based server to eliminate security risks and liabilities.
Tokenization benefits more than just the customer. As a business owner, you can ensure that you are PCI compliant by not storing sensitive credit card data within your system.
You can also use tokenization technology to secure business passwords, email addresses, employee files, and customer accounts.
Protect Your Sensitive Business Data
Tokenization is a growing technology, and can save businesses millions of dollars in fraud liability while shielding consumers from the hassle of dealing with data theft.
In the future, tokenization of data will be essential in the world of credit card security, and businesses can benefit greatly from taking advantage of payment card tokenization.