Tokenization is an increasingly attractive way to make online payments. The technology is growing more rapidly in the eCommerce world as a more secure and cheaper alternative to what many businesses currently have on offer for customer payments. If you have any questions about how this new technology benefits businesses, here’s everything you need to know about tokenization.
What is tokenization?
When a shopper buys something online, they are required to input confidential and sensitive information, such as their address and credit card info. While strong security measures are taken, giving out this information online is risky since it may be stolen. Tokenization increases the security level for sensitive credit card data.
Basically, tokenization is the process of replacing sensitive data with unique identification symbols that capture all the vital information about the data without compromising its security. Tokenization makes it hard for hackers to capture consumer’s data. It has become a favoured way for small and mid-sized businesses to reinforce the security of credit card transactions and eCommerce online payments.
The benefits of tokenization
Tokenization makes it easy and more secure for customers to use their credit cards when paying for purchases online. Instead of having a server encrypted and protected with passwords, making it possible for customers to use tokens is more speedy, cheaper and simpler, and does not lower security. Tokenization provides a way of handling eCommerce purchases that’s not only more secure but easier too.
This payment system not only works when credit cards are swiped or inserted at the point-of-sale, but can also be used with several other types of payments such as gift cards. Tokenization can be used with any type of payment or technology.
What are its drawbacks?
The fact that tokenization is still relatively new means there aren’t enough businesses who can testify about having experienced long-term success with it yet. This makes it challenging to measure how effective it has really been yet. Most people still don’t feel comfortable with tokenization, particularly those who aren’t comfortable outsourcing it to a third-party company. The tokenization system may not be as risky as outsourcing the storage of credit card information, but it’s still difficult for businesses to guarantee the security of their customer’s information.
Standards for using tokenization
There are certain standards for using Tokenization. Recently Visa, MasterCard, and EuroPay published 85 pages of standards that should be noted by companies who use tokenization. This is a step towards tokenization being taken more seriously as a new eCommerce technology, as well as enhancing how it is used.
Will tokenization affect your business?
While tokenization may not affect your business right away, it most likely will in the future. This method of payment has the potential to revolutionize eCommerce, and eCommerce businesses will eventually need to update their sites and technology as the technology used in tokenization evolves. If you don’t pay attention to tokenization, it can easily be a pitfall for your business, instead of being a new advantage. It’s likely that businesses that switch to this payment system may disrupt the market and pull away or alienate potential customers.
Tokenization is gradually becoming an important technology to prevent fraud and will affect all companies spread out across the retail, payments, and financial industries. That’s why understanding what tokenization means and how it works can help eCommerce businesses improve their payment solutions. Keep up with the latest developments as tokenization keeps growing, because businesses that don’t gradually integrate it may be left at a disadvantage in the future.