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How tokenization and end-to-end encryption secure payments

In an age when data breaches and fraud pose looming threats, the security of our digital transactions is more important than ever. That’s especially true when it comes to the security of payments data.

Consumers, businesses and the payment industry that connects them reply on technologies like tokenization and encryption to secure the payments we make every day. Let’s take a look at these security terms in plain language to understand what they mean and why they matter to businesses like yours.

What is tokenization?

Tokenization is a simple process of replacing sensitive data with non-sensitive token data. The actual data is stored in purpose-build secure token “vaults.” Electronic payments require data to perform essential functions. Tokenization allows businesses and their customers to safely conduct payment transactions while making that essential transaction data of “no cash value” to criminals.

How does end-to-end encryption work?

End-to-end encryption uses cryptography to essentially “scramble” data at one end in order to secure it for transit and decoding by the recipient. A third-party provides encryption keys to parties on both ends, allowing far more secure communications than sending raw, unencrypted data.

End-to-end encryption has its roots in the early 90s when it was popularized in a program called PGP, (Pretty Good Privacy) and is still in wide use today including popular commercial communication apps like Apple’s iMessage.

What’s the difference between encryption and tokenization?

Encryption and tokenization are important technologies that are complimentary and are often deployed together as part of layered security approaches. Yet there are a few key differences that are important to keep in mind.

The most important difference between encryption and tokenization is functional: encryption protects data in motion while tokenization protects data at rest. Encryption is significantly more secure than transmitting raw data, though encryption can be reversed-engineered or accessed by stolen corresponding keys.

Encryption relies on cryptographic algorithms and cryptographic keys to encode data during transit, transit that poses risks as data travels over networks between trusted parties. Tokenization replaces essential data with tokens, storing the sensitive private data in a vault. Token vaults are far more secure than standard operational systems because they are built for the sole purpose of token storage.

Why is tokenization important in payment processing?

Tokenization has emerged as a critical technology that help protects business by reducing their exposure to the threats posed by data breaches. Storing raw credit card and other personally identifying information on business systems made follow-up transactions easier, but it also increased risk. Tokenization reduces risk by removing the target from business systems: even if your data is breached, that data is worthless to the criminals who would use private data to conduct fraud.

Tokenization can reduce the scope of your systems that fall under PCI DSS, the Payment Card Industry Data Security Standard. All businesses that accept credit and debit cards need to be in compliance with these baseline standards. Using tokenization and encryption represent best practices that reduce the time, focus and costs associated with compliance auditing.

Encryption and tokenization bring digital wallets to life

Shoppers demand equal measure of convenience and security, however they shop. Digital wallets—also known as mobile wallets or eWallets—deliver on both counts. Though working quietly behind the scenes, tokenization is a driving force behind the rise of digital wallets. Mobile apps have emerged as a vital sales channel largely because of integrated payments. Pre-loaded payment credentials make checkout easy for consumers, while encryption, tokenization, and device authentication provide extra layers of security.

Tokenization and end-to-end encryption are services offered to businesses by their payment provider. Worldpay is a global payments leader with pioneering expertise in using end-to-end encryption and tokenization to protect payments everywhere they take place. Connect with one our payment experts to learn more about how encryption and tokenization can help protect your business.

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