Today, many consumers are now choosing to make purchases with their mobile devices, instead of with cash or credit cards. Consequently, merchants are noticing the growth of mobile payment technology such as Apple Pay® or Samsung Pay and are starting to integrate mobile transaction acceptance for their business. Since mobile technology is still fairly new, there has been concern on how safe and secure mobile purchases are. Tokenization is one form of security for mobile transactions that has numerous benefits.


What is Tokenization?
With mobile transactions, tokenization works by exchanging the credit or debit card number that is stored in the mobile wallet on a smartphone with a valued token and replacing it with non-sensitive data. This non-sensitive data includes a mixture of letters, numbers, and symbols and appear as EKW29481CR#0@3. These random sequences of tokens are produced every time a transaction occurs to help further secure a transaction. 


Security Features
Prior to tokenization, traditional payment processors used the magnetic stripe on the back of the consumer’s debit/credit card. This non-secure feature led to some high-profile data breaches. Although the traditional magnetic stripe processing method is competent, it lacks the added level of security that tokenization provides. 


Each time a payment is made with tokenization in place, the transactions are useless to cyber criminals, as they cannot replicate the unique codes transmitted via a token. Merchants wanting to adopt tokenization will need to get with a payment processor to see if their terminal model currently accepts tokenization – if not, they will need to upgrade to a terminal that has the software included. 


“Our No. 1 goal (with tokenization) was to get the card numbers off of our system and limit our risk. It really wasn’t any type of cost justification; it was really from risk analysis. If somebody hacked into our system, we’re gonna have a problem. So it made all the sense in the world, given the cost of tokenization, which is not a heavy burden to carry,” said Tom Malin, ERP manager of Omega Engineering.


Benefits of Tokenization
There are several benefits of using tokenization in the payment industry. Perhaps the most evident is that tokenization protects cardholder data during a transaction, ultimately preventing cyber criminals from retrieving sensitive cardholder information and using it for fraudulent purposes. 


Tokenization is also integrated to work with the top mobile wallets that consumers are currently using – Apple Pay, Samsung Pay, and Android Pay. With a mobile wallet, none of a consumer’s confidential cardholder information is linked on their phone and is completely hidden from the retailer during a transaction – only the processing company has access to the consumer’s private banking information. As a result, tokens are a great benefit for mobile devices since they imply a consumer’s personal details, but withhold it from the merchant. Consumer’s can rest assured knowing their mobile wallet will protect their cardholder information via tokenization. 


Tokenization has made a huge impact on the payments industry and the future of mobile payments. With enhanced levels of security and benefits of working with the main mobile wallets, tokenization will become a great asset to stop data breaches and fraud from happening.