»Finance»What is Tokenization in Credit Card Processing and How Does it Secure Recurring

What is Tokenization in Credit Card Processing and How Does it Secure Recurring

Posted by : on Nov 08,2021 01:36 PM

You might have heard about Credit Card tokenization? This is a process where sensitive consumer details are replaced with an algorithmically generated numeral. It is impossible to trust this numeral back to the original information or data. This results in a token - which makes misuse of sensitive data impossible. The data cannot be traced back to the actual source due to the tokenization algorithm.

How Does Tokenization Work?

It is often that tokenization starts just like a traditional credit card transaction. For instance, if you visit a website for a regular online purchase and add items to cart, you will be finally led to the checkout page for payment. You would be prompted to enter your credit card details. The process up to this point it is the same as in case of any E-Commerce or online sale.

It is only when you submit the transaction that the variation shows. Upon the completion of sale, you might like to store your card to be used in future. The tokenization process starts here. Once your credit card is confirmed to be valid, a token is generated. It is nothing but a numeral - associated to that particular card. It is only a reference number and not a credit card number. The company, issuing the token, knows which token is associated to which card.

Whether a token is initiated from a confirmation request or from a traditional E-Commerce sale, the main purpose is to get back a response from the card issuing company to check the validity of the card being used for the transaction.

Tokenization and Recurring Payments

Recurring payments are becoming more and more widespread, with an increasing number of people shopping for services and products online each and every day.

Recurring payments are made much safer with tokens. Tokenization solutions are being used by more and more payment providers for saving cards. There are some circumstances when you might not like to have an upfront processing of a credit card but would like to have a card tokenized for some other reason.

At any time that you wish to use that card in future for billing purposes, the token number can be referenced later. You can actually store credit card information with the help of the token, with no need to have the sensitive card details stored on your database.

As Tokenization becomes more regulated, payment providers can find it even more convenient to save cards on their own database with the help of approved tokenization solutions. When this happens, repeat transactions will become easier and safer.

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