The term payment tokenization is being used in abundance for the last few months. It is a complicated process that helps to protect our sensitive data. It is kind of like purchasing tokens at a casino in exchange for money to play at the slot machines. A similar system works here as well.
Wish to know more? Then read on as we explain what payment tokenization is, how it works in general, and for the commonly-used payment apps. So let’s get started!
What Is Payment Tokenization?
To put it simply, the term "tokenize" refers to the act of substituting or transforming something into something else. Credit card tokens are used to replace sensitive data (such as a customer's credit card number, address, or account number) with a series of algorithmically generated digits and letters. Merchants can transport data between networks using credit card tokenization without revealing customers' sensitive information.
The "token" is a series of randomly generated integers that replaces the customer's primary account number (PAN). These tokens can then be transmitted across the internet or various wireless networks to complete the transaction without exposing actual bank information. In a secure token vault, the actual bank account number is kept safe.
Now that we know what payment tokenization means, let’s see how it works.
How Does It Work?
Tokenization replaces sensitive client data with a one-time alphanumeric ID that has no value and is unrelated to the account's owner. Customers' credit card information is safely accessed, passed, transmitted, and retrieved via this randomly generated token.
Tokens do not include any personally identifiable information about customers. They're more like maps that show where the customer's bank stores sensitive data on their systems. Tokens are created using mathematical processes and are irreversible. Only after the transaction is complete can the tokens be opened. These tokens have no significance or value outside of your system. So even if hackers get their hands on your information while it's being processed, they won't be able to use it.
Originally Posted: https://www.emeriobanque.com/blogs/what-is-payment-tokenization-and-how-does-it-work
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