Tokenization: How to Protect Your Customers’ Data

Tokenization: How to Protect Your Customers’ Data

PCI compliance means that you, as a business owner, are taking every necessary precaution to protect and secure your data. PCI stands for “Payment Card Industry;” PCI compliance refers to businesses complying with set Data Security Standards (DSS). These Standards are set forth by cardholder associations like Visa and MasterCard. PCI DSS helps to prevent payment card fraud and identity theft, which costs major card brands millions annually. One effective way to guard against identity theft is to tokenize payments. Tokenization makes it harder for hackers to steal cardholder information. Here’s how it works.

What is Tokenization and How Does It Work?

Payment tokenization flowchart

Tokenization replaces credit card numbers with a different, random string of numbers, called a “token.” The card number is stored securely and the token replaces it. The token can then be used in place of the actual card number. These numbers have no relation to the customer’s data, so as a merchant, you don’t know what the card number is. This makes it a much more secure option for merchants to handle in day-to-day operations.

Many payment platforms use proprietary tokenization technology to secure card numbers. Tokenized card numbers can also be stored and used in transactions later on, making it a secure option for protecting cardholder data. This is helpful when you want to automate recurring charges for customers.

How Does it Protect My Data?

Tokenization ensures merchants never directly handle card numbers. This cuts down on the chances for hackers or data thieves to access the payment information. The token is created through an algorithm, so it can’t be used without a way to interpret it.

And the token can’t be reverse-engineered to show the original card number, so the random number can’t be used by hackers or identity thieves. If you use tokenization with a POS system, the data in question isn’t stored on the hardware, which makes staying PCI compliant easier.

Do I Need Tokenization to Be PCI Compliant?

Tokenizing card numbers not only protects your customer’s data, but it also keeps costs down to remain PCI compliant. Any merchant who handles a cardholder’s data must be PCI compliant or face hefty fines. By using tokenization, you can comply with PCI standards for storing cardholder data. This eliminates some of the extra work that goes into becoming PCI compliant.

In order to become PCI compliant, merchants much complete a self-assessment Questionnaire. If your system uses tokenization and doesn’t store credit card numbers, you may qualify for a shortened version of the questionnaire. Staying PCI compliant with tokenization is just one step in protecting cardholder data. But tokenizing card numbers minimizes the risk of hackers stealing cardholder data.

Tokenization is a valuable tool for securing card numbers. By using tokens in place of card numbers, merchants can safely store data and use it for later transactions. This minimizes the risks from hackers and identity thieves. Tokenization is a vital part of data protection and PCI compliance, and merchants should use tokenization as part of their fraud prevention and security measures.

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