Since data security is a primary focus in the payment processing industry, new technology and industry guidelines have been developed to better safeguard against potential breaches. EMV chip-based credit cards are slowly being rolled out by providers, while merchants are beginning to adopt the payment processing equipment that accepts the new cards.
Both the new cards and the processing infrastructure have added levels of security to better protect sensitive customer information, one of which includes tokenization. Traditional payment processors used the magnetic strip on the back of the consumer credit card, which has led to high-profile data breaches. The new means of transaction tokenizes customer information each time a payment is made, assigning personal information a series of unique and meaningless identifiers. The transaction still goes through, but in essence, the data becomes useless for any outside parties since they cannot use the unique codes to replicate credit cards.
Merchants, take a deep breath
Cybercriminals have found a number of ways to hack into current payment processing systems. While the traditional magnetic strip processing method is efficient, it doesn't come with the added level of security that EMV provides. Tokenization takes personal information, or the primary account number, and replaces it with non-sensitive data, such as symbols, letters or any other random sequence of tokens.
This information is rendered useless unless hackers access the specific description keys, but since each individual transaction is assigned a different code, cybercriminals lives just got a lot more difficult. Merchants have the upper hand when it comes to tokenized payment processing because customer information isn't stored on their payment processing hardware. The microchip in the card does all the legwork for the transaction. It stores the information while the payment is being processed, which lessens the probability sensitive information will fall into the wrong set of hands.
Yet, despite the added levels of security, EMV and tokenization aren't impervious to breaches. Hackers may still find a way to penetrate a merchant's network security, but according to industry website PaymentsSource, there are three ways tokenization can protect merchants if and when they are vulnerable to fraud:
- Card present: This is the protection at the point of sale. Personal information is tokenized, therefore making it difficult for a breach to occur.
- Card absent: When merchants accept card-not-present transactions, tokenization's encryption can help stores that keep customer information on file for recurring payments through secure storage technology.
- Mobile contactless: Using host card emulation, tokenization can protect mobile payments as well. The encrypted data via mobile device also isolates the payment channel from others, meaning if data is stolen from the phone, it can't be used to make fraudulent transactions at a merchant's point of sale or via e-commerce.
Certainly, tokenization brings a multitude of benefits to the payment processing industry. It's added levels of security are leaps toward complete data protection, but merchants still must be aware of the potential threats they face now and after they implement new industry technology.