What is Credit Card Tokenization?

Credit card tokenization is an advanced data security technique designed to protect sensitive cardholder data from being accessed through potential security breaches or by attackers.This process works by converting the original data into a unique and random sequence of numbers, which is referred to as a "token" through a process called "tokenization".

The primary benefit of tokenization is that it renders the original data unreadable, even if it is intercepted by unauthorized parties. Unlike encryption, which can be reversed, tokenization is irreversible. As a result, sensitive data is fully protected and secure, making it a great option for protecting credit card data. 

Advantages of Credit Card Tokenization

One of the most significant advantages of credit card tokenization is that it allows businesses to store credit card data in a secured format within their cardholder data environment without violating the Payment Card Industry Data Security Standards (PCI DSS). This enables organizations to maintain PCI compliance while also keeping their customers' data safe.

Moreover, tokenization can be implemented in a format- and length-preserving manner, enabling businesses to retain much of the original sensitive cardholder data's business utility. This approach minimizes the need for extensive changes to existing business processes and data requirements which ensures a smooth transition to the new system.

How Does Credit Card Tokenization Work?

Third-party tokenization providers, like Basis Theory, employ a technique that generates random data called tokens to tokenize credit card data. This process replaces the sensitive credit card data with a nonsensitive credit card token number, stored safely outside your environment and in a cardholder data environment (CDE). Meanwhile, the original sensitive data is removed from your internal systems and removed from PCI compliance scope.

When working with a third-party tokenization provider, there are effectively three core elements of the process:

• Credit card data collection: rather than hosting their own forms and storing the data in their own database, merchants embed forms that deliver the details directly to their tokenization provider. The provider responds to the merchant with a confirmation code, and a token which can be used to access this information. 
• Data storage and update: the sensitive information remains in the care of the tokenization provider in a secure token vault, which guarantees full Level One PCI-DSS regulatory compliance as a cardholder data environment. If the customer wants to update their stored information, the merchant provides another form that will again deliver the update to the tokenization provider.
• Transmitting the tokenized data: using the token (as well as going through sophisticated identification and authorization processes), the merchant tells the tokenization provider to transmit the credit card data to the PSP of their choice. The provider executes the transaction and brings the result back to the merchant for their record - without ever revealing cardholder data that could cause the merchant’s payment system to come in-scope for PCI.

Credit card tokenization providers often offer extensive API interfaces, prepared templates, and design guides to accelerate the implementation process. Because of the security and simplicity of this method,  credit card tokenization is a highly effective and innovative solution for protecting sensitive cardholder data.

Benefits of Tokenizing Credit Card Data

While achieving and maintaining PCI compliance is one catalyst for many merchants to choose to tokenize this sensitive data, tokenizing credit cards offers many benefits, including: 

• Achieving PCI DSS compliance
• Enhanced security of sensitive cardholder data
• Minimal disruptions to existing business processes
• Flexibility to share the data with any payment partner, securely (when leveraging universal tokens like those offered by third-party tokenization providers)

Learn more about the benefits merchants can experience by partnering with third-party providers like Basis Theory for credit card tokenization services.

How Can Credit Card Data be Captured Using Tokenization?

In a browser-based application an iFrame can be used to collect cardholder data directly from the fields of the checkout page, which minimizes the scope of PCI DSS compliance by preventing data from entering the cardholder data environment. The seamlessness of this approach means that it can be used alongside credit card processing, maintaining the look and feel of the website's checkout page.

On mobile, cardholder data can be captured from mobile applications on Android or iOS devices, whether the applications are native or web-based. The credit card information is collected through either the same iFrame approach used in browser-based scenarios, or through components in mobile SDKs to capture, encrypt, tokenize, and store the data securely.

In call centers, Basis Theory can integrate with various technologies such as point-to-point encryption (P2PE), interactive voice response (IVR), and dual-tone multifrequency (DTMF) to tokenize sensitive payment data. This approach removes the credit card information in systems downstream from the call center environment, reducing the organization's compliance scope and alleviating the need to store sensitive credit card data in internal systems.