Nowadays, in an increasingly digital era, electronic payments have become a necessity for any type of business. However, the increasing amount of data and transactions carried out over the Internet has caused a great interest in ensuring the security of personal information. In this context, tokenization has become an increasingly used technique when making digital payments. Would you like to know more about tokenization? We tell you what this system is, the main examples and the advantages of using it in your business. Shall we get started?
But, what is tokenization?
Tokenization refers to a system that exchanges confidential data for equivalent identification symbols, known as tokens, so as not to compromise the security of the personal information contained in the data. A token only plays the role of an identifier. It is an interesting digital payment method to protect credit card data and provide greater security in digital transactions.
When the tokenization process is activated for payments, a random and unique value is generated that replaces the buyer’s personal credit card account number. This unique identification value is the token and after passing through the network the payment is made securely. The bank card number and the user’s personal data are protected at all times.
How does the tokenization process work?
At the time of payment of an online order, the buyer enters his credit card details. These are collected by a payment gateway that sends them to the server within a payment form, and a random token is returned to the customer. The tokens are generated in real time and are different each time the user includes his data to make an online transaction. In other words, the same credit card will generate a different token depending on how it is used.
A token represents a buyer’s personal and bank details and is stored in the seller’s database for future transactions. For this reason, it is safer to use a token instead of your card’s PAN number. In the event that the database is compromised, hackers would only be able to access a unique identification code rather than the user’s bank details.
Examples of tokenization
Tokenization is one of the most common digital payments in businesses with an online presence to improve user security by preventing personal data from being leaked or stored on different platforms. It can be used in different types of online transactions. Some of them are:
Subscriptions or periodic payments
Tokenization allows you to store your customers’ bank details in the form of tokens so that future payments are made automatically and without interruption. Therefore, if your business offers subscriptions or recurring payments, this type of digital payment will bring you great benefits.
“One-click purchase” option
One-click ordering is a simple and fast way to complete the checkout process. Many businesses use this practice to enhance their users’ experience and reinforce their loyalty. This method provides immediate satisfaction to repeat users and increases the likelihood that the user will complete a business transaction.
Digital wallet applications allow you to store information from a bank card on a smart device. It is the most recurrent payment method by users thanks to its convenience. Its operation is possible thanks to tokenization and facilitates contactless payments in a secure environment.
Online payment platforms such as Apple Pay, Google Pay or Pay Pal use this technology to protect their users’ credit or debit card data.
Advantages of using tokens as a digital payment method
Tokenization helps companies with an online presence to protect their business from cyber-attacks and keep their users’ data secure. This translates into a better shopping experience and therefore increases the conversion rate. Let’s take a look at some of the main benefits of tokenization:
- Fraud reduction. This technology helps you prevent the leakage of a customer’s personal and banking data.
- More security in virtual wallets. Tokenization through bank or third-party applications incorporates a verification method that is twice as secure. When a user reaches the checkout of their purchase to confirm the payment they will have to validate the transaction by password or facial recognition.
- Better user experience. This digital payment system brings a higher level of confidence to users by ensuring secure data storage.
If you want to keep your users’ data secure, improve their shopping experience and build loyalty over time, using a tokenized payment system is the solution for your business. In addition, with Gofun’s business intelligence and big data analysis tools, you can collect and digitize all the data on sales made, transactions per user, the payment method used, the point of sale, the time, etc. Anticipate the possible needs of your customers and make your company profitable.