If you are still storing credit card data the old-fashioned way, you are dramatically increasing your chances for cyberattacks. Luckily, you can use tokenization to handle this process safely – and today, we will tell you how.
The Payment Card Industry standard
With the rise of digital payments adoption and the concerns regarding potential fraud and cyberattacks, data security has received a lot of attention during the last couple of decades. For this reason, the biggest credit card companies gathered in 2006 to establish strict and efficient security standards that regulate the management of credit card data, or the so-called PCI-DSS – Payment Card Industry Data Security Standard.
If older POS and other database systems allowed the storage of credit card numbers and their free exchange over networks, the arrival of PCI made it no longer possible. Nowadays, PCI Compliant businesses must store credit card data through a process called tokenization, making it safer and less vulnerable to hackers.
What is tokenization?
Tokenization is the process of converting credit card numbers into randomly-generated, undecipherable values called tokens. In other words, every time you want to store the credit card number of a client in your database, the system transforms it into a random combination of characters without any meaning.
As opposed to encryption, a security method that allows information to be deciphered with the adequate key, tokens cannot be decrypted as there is no mathematical relationship with the original account number. Because the token usually contains only the last four digits of the actual credit card for a specific transaction, hackers will not be able to access the whole account number of the cardholder.
How does tokenization work?
In a traditional, non-tokenized transaction, the credit card number is sent to the payment processor, and then stored in the merchant’s POS terminal or other internal systems for later reuse. Now let’s see what happens during a tokenized transaction.
In this case, after the customer has entered his credit card number, instead of going directly through the payment processor, the data is first sent to a tokenization system. This system assigns a random combination of characters to the credit card number, or the so-called token. After the token has been generated, it is returned to the POS terminal and the payment processor in a safe form in order to complete the transaction successfully.
Benefits of tokenizing data
- Tokenization ensures the correct formatting and transmission of data, making it significantly less vulnerable to cyberattacks.
- Because the token is practically unreadable by anyone except for the payment processor, you ensure both external and internal protection, including employees or other people connected to your business.
- Tokenization reduces significantly the risk for a data breach, which has a positive impact on your costs – if a breach happens, and you are not-compliant with the security regulations, the penalization costs can be huge, sometimes up to $100,000 or even more.
- Allows for recurring payments and other payment options in a safe environment, simplifying the subscription-based processes;
- It applies not only to credit card numbers, but also to any kind of personally identifiable information, such as passwords, files and customer accounts.
How do I become PCI Compliant so I can tokenize my data?
Tokenization is one of the main pillars of the PCI-DSS security standards. To become PCI Compliant, you can either obtain a certification for your business, or hire a third-party provider. Because getting certified in PCI can be extremely costly for many companies, using the services of an already compliant digital payments provider is the widely preferred alternative.
If you are looking for a fully compliant third-party provider, MYMOID is a payment platform that allows you to process and store cardholder data in a completely safe environment. You can contact us for more information.