Fintech Insights

4 reasons to use tokenization

Worldpay Editorial Team

July 09, 2019

A token of extreme security

Four reasons why tokenization matters to businesses

Tokenization may sound complicated, but its beauty is in its simplicity.

Tokenization substitutes a string of random numbers—known as a token—for private data like payment account numbers. Instead of complete private account data passing through multiple systems of varying security, personal data is tokenized upon swipe, dip, or entry of credit card information online. The actual data the token references is stored in highly secure token vaults. The tokens themselves are worthless to fraudsters.

Tokenization makes the process of accepting payments easier and more secure. Tokenization is more than just a security technology—it helps create smooth payment experiences and satisfied customers. Tokenization reduces risk from data breaches, helps foster trust with customers, minimizes red tape and drives technology behind popular payment services like mobile wallets.

Best of all, businesses reap all these benefits today.

#1 – Tokenization reduces risk from data breaches

Criminals target businesses that accept credit and debit cards because there's a wealth of intelligence in payment information. Hackers target insecure systems that contain this intelligence, and sell the stolen data or use it themselves to make fraudulent purchases.

The costs to businesses are all too familiar. Ponemon Institute's 2018 Cost of a Data Breach study pegged the average cost of a data breach at $3.86 million. Ponemon's estimate for each lost or stolen record containing confidential information now stands at $148.

Tokenization helps protect business from the negative financial impacts of a data theft. Even in the case of breach, valuable personal data simply isn't there to steal. Tokenization can't protect your business from a data breach—but it can reduce the financial fallout from any potential breach.

#2 – Tokenization helps foster trust with your customers

Consumers want safety and security, wherever they shop. In this era where fraud poses threats throughout the economy, building trust and loyalty with customers begins with keeping their payment and other personal data safe. In a 2018 CA Technologies/Frost & Sullivan study 59% of consumers said a data breach had a negative impact on their trust in the affected company.

Beyond avoiding the worst case scenario of a data breach, using advanced security such as tokenization, fosters customer trust. Consumers don't want their payments data falling into the wrong hands. Demonstrating a strong commitment to the security of customer data is appreciated by consumers.

#3 – Tokenization means less red tape for your business

Businesses that accept credit and debit cards need to be in compliance with the Payment Card Industry Data Security Standard (PCI DSS). Tokenization makes achieving and maintaining compliance with industry regulations significantly easier.

Tokenization addresses requirement set #3: protecting cardholder data at rest. PCI DSS seeks to reduce retention of sensitive data and safely govern its storage and deletion. Tokenization satisfies this critical requirement by never letting sensitive cardholder information touch your systems in the first place.

It isn't a compliance silver bullet. But working with a PCI-compliant vendor offers a smart approach to payment security. Leading payment technology companies offer tokenization as part of their payment processing services. That lets you focus on growing your business while your payment partner reduces red tape to help keep your business in compliance.

#4 – Tokenization drives payment innovations

The technology behind tokenization is essential to many of the ways we buy and sell today. From secure in-store point of sale acceptance to payments on-the-go, from traditional eCommerce to a new generation of in-app payments, tokenization makes paying with the devices easier and safer than ever.

The rising popularity of in-store payments with your customers' mobile devices features tokenization. When consumers pay with a mobile wallet such as Apple Pay or Google Pay, their personal credit card data is stored on their phone as a token. Additional security comes from smartphones themselves with the additional layer of biometric security and other advanced authentication measures.

Tokenization is a cornerstone to eCommerce by making payments safer and improving user experiences—whether online, mobile or in-app.

Optimizing your payment provider

Tokenization services should be offered by your payment provider. Connect with one our payment experts to learn more about how tokenization can help protect your business.