What is payment tokenization?

The tokenization is a process that takes real information from the credit card and replaces it with randomly generated data to protect that information during a transaction. This makes it possible to reduce the risk of potential fraud for merchants, which will increase security within e-commerce. Tokenized payment systems reroute transactions without compromising safety or flexibility.

It is important to note that the customer's real card data remains stored in their bank vault, which enables faster transactions when using tokenized payment systems.

As for now, there are two types of tokenization: the dynamic data generated by the terminal when processing an order and static tokens created by the client via authorization provided by different solutions (e.g. Token Service, ApiGateway).

What is the benefit?

First of all, payment tokenization reduces the risk of potential fraud for merchants that will increase security within e-commerce. Secondly, it speeds up transactions as well as increasing conversion rate because it does not require additional communication between backend systems and the card networks.

The trend is using payment tokenization systems for better security and reducing the risk of potential fraud. Tokenization can also be used as a way to speed up transactions as well as increasing conversion rate because it does not require additional communication between backend systems and the card networks.

Where can we use it?

One of the ways is to integrate tokenization into your website or mobile app. This way you can use payment tokens to process transactions without sending the real card number through the internet.

Another option is to use existing solutions (e.g. Token Service, ApiGateway) which will give you an option of creating payment tokens either on client side or server side. This will enable you to integrate tokens into your backend systems.

Who are the market players?

Visa announced their new token service for digital commerce in June 2015, while MasterCard has already released its tokenization program in March 2012. American Express is developing a tokenization framework and PayPal provides several payment-tokenization solutions (Token service, Braintree v.zero SDK, PayPal Adaptive Payments).

What challenges do we face?

The main challenge is to provide merchants with a simple and efficient way to tokenize payments without compromising safety or flexibility. Another challenge is to increase the adoption of tokenization among consumers.

In order to increase the adoption of a new system, it should be easy to use and provide a quick access to the payment method. On the other hand, tokenization needs to protect both online and offline transactions. This means that any consumer who makes a purchase from an e-commerce store or in a physical store can benefit from it regardless of their location.

In conclusion, contactless payment tokenization is one of the most important trends within mobile commerce. Tokenization has a huge potential to change the market and become a leader in secure digital payments.

More about Token Service:

Token Service reduces risk for online merchants by helping them protect their customers' card details while reducing costs associated with PCI compliance, customer care and chargebacks. Token Service is a PCI-certified payment gateway that enables businesses to tokenize credit and debit card data, making it safe for storage and transmission.