What Is Tokenization?


What Is Tokenization?

Tokenization – What Is It And Why Is It Important?

Tokenization has become more and more important for both brick and mortar and e-commerce stores. With hackers seemingly running rampant nowadays, the importance of payment security has gone through the roof and thus new methods of encryption are needed to protect card holder data.

Tokenization is the process of taking sensitive data and replacing it with unique symbols or characters. For example, a tokenization will take a plain text password such as “admin123” and change it into a random string like “18ndls80naldi28”. It would then require a software or program to decode that string and pass through the information securely.

The object of tokenization is to leave sensitive information such as credit/debit card numbers, expiration dates and CVV codes and make it impossible for hackers to steal the information directly and use it elsewhere. Even if there were a breach where the tokens could be seen by a hacker, the token would be completely useless because there is no specific algorithm to obtain the original credit card information. 

Where Is Tokenization Used?

As stated before, this method of scrambling plain text data is becoming a more widely used form of transaction security. In the case of brick and mortar stores, those who accept Apple Pay or other NFC payment types use tokenization to transfer the information from the phone to the terminal.

Similarly, e-commerce web sites usually always use this method in conjunction with an SSL (secure socket layer) for maximum security. 

While tokenization is a smart way to deter hackers and online fraudsters, it is not completely fool proof. They are constantly looking for workarounds to gain access to personal and card information. The best way to combat fraud and identity theft is to make sure that you’re fully PCI compliant, regardless of how you accept transactions and that your terminal or website is always up to date with the latest software releases, updates and patches.