Data breaches are more frequent than ever, hackers are getting wiser, and the amount of compromised information is on the rise, even if corporations strive to protect their data from cybercriminals. The latest data breaches show that nowadays money is the main factor that motivates cybercriminals.
Many aspects boost a company’s risk to experience breaches, but some industries are more vulnerable than others. Past data breaches show that healthcare organizations are hackers’ main targets. 88% of the businesses that have over 1 million folders provide access to 100,000 folders for all their employees. Corporations protect only 3% of their files so the first step in fighting cybercrime is security upgrade.
They can start with data tokenization, a data security measure that protects sensitive data from attacks. Merchants can apply it to their financial transactions if they no longer want to keep credit card data within their payment systems.
Basic info about tokenization
Tokenization helps companies that handle credit card data and corresponding information to comply with the latest cybersecurity regulations of the Payment Card Industry and fight cybercrime.
Tokenization is defined as a secure method used to replace personal information with a token unique for the client. Even if the customer uses the same payment method multiple times, the token differs from the last time they shopped. This way, retailers keep on-site only the information relevant to the payment process, without having access to their clients’ personal data. Tokenization is different than encryption because it doesn’t use a cryptographic key or an algorithm that can reverse information back to its initial form.
Above we have the simple answer to What is tokenization? But this question also has a complex one. The process implies replacing sensitive data like a credit card number with a unique number that has a zero connection with the customer or their account. The buyer’s primary account number is replaced with a randomly-generated alphanumeric ID. There’s no connection between sensitive data and token. But for this method to be effective, it requires a payment gateway that facilitates random token generation.
For retailers, it’s a complex but essential technology if they want to provide secure payments. It’s crucial for the companies that allow their clients recurring payments and cards on file for subscription billing. It’s also important for corporations that provide one-click checkout options and mobile payments.
Why should companies use data tokenization?
Explaining how tokenization works it’s complicated, but its beauty is in its effectiveness. Its main purpose is to make payment processing simple and secure. It isn’t only a security method, it creates a smooth payment experience for the customer. And the clients are happy because it reduces the risk of cybercrimes.
The following paragraphs will underline the benefits businesses get if they use data tokenization in 2020.
It lowers the risk of data breaches
Credit card payment is a factor that makes corporations vulnerable to data breaches. Hackers target organizations that process credit card payments because of the wealth of intelligence payment information provides. They hack insecure systems that contain sensitive data to use or sell it later for fraudulent purposes.
Data breaches are devastating for companies because the Ponemon Institute reports that the average cost of a single data breach can reach $4 million. Organizations lose around $150 for each compromised record.
Tokenization protects organizations from the negative effect of a data breach. And if cybercriminals hack the system, there is no data they can use. So, it both protects companies from data theft and reduces the effects of cybercrimes.
It fosters trust with the public
People choose reliable companies when they shop. Everyone is aware they are living in a period when fraud is the biggest threat to the economy, so they ensure the retailers they buy from provide safe and secure services. Building credence is essential for companies that sell products via card payments because their customers want to know their personal information is safe. If a data breach affects a brand, people find it hard to trust it again.
Tokenization helps companies avoid this scenario and boost customer entrustment. People don’t want their sensitive intelligence to fall in the wrong hands. By proving to their public, they are committed to protecting their data, organizations foster credit.
It helps companies comply with the Payment Card Industry Data Security Standard
All organizations that process credit and debit card payments need to comply with the PCI DSS. Without tokenization, it’s difficult to maintain compliance with these regulations because it addresses the requirement that asks companies to protect cardholder data at rest.
PCI DSS’ purpose is to reduce the retention of personal data and safely govern its storage and deletion. Tokenization meets this requirement because it prevents systems from accessing cardholder data.
It supports payment innovations
Tokenization relies on technology essential for the methods people buy and sell. It facilitates all types of payment methods, no matter the system that powers them.
When people pay with their phone instead of their credit card, they use tokenization. Their smartphones store their personal data as a token. Because nowadays smartphones have their own layer of biometric protection, customers enjoy advanced security measures.
Some examples of tokenization
Android Pay and Apple Pay are only two of the many payment services that rely on tokenization to protect their clients’ sensitive data.
Apple Pay asks for the user to take a photo of the credit card they want to use for the Apply Pay mobile wallet. Then the issuer provides the details that are switched to a token. Apple places the token onto the smartphone, so the device protects the real information.
Android Pay counts on a similar process. Once the card information uploaded, Google generates a temporary token, the cardholder can use to make payments.
Wrap Up
No matter what system, app or technology organizations use to process payments, they can integrate tokenization in their operations to provide secure services. Having a payment processing method powered by tokenization ensures PCI compliance, customer trust, and reduced risk of a data breach.
Last Updated on February 3, 2021.
