Payment technology is evolving rapidly.
As digital payments move to online platforms - the need for privacy and security has never been more important.
SaaS platforms that offer credit and debit card payment acceptance for their users must also be able to increase data security and prevent credit card fraud.
One of the most secure ways to protect against loss or theft of customer data is through credit card tokenization.
What is payment processing tokenization for SaaS platforms?
Credit Card tokenization is the process of replacing sensitive customer details with an algorithmically generated number that is impossible to trace back to the original data or information.
So when a customer takes a purchase using a credit or debit card, the tokenization process takes the card number and transforms it into a mathematically irreversible token and therefore impossible for anybody to misuse sensitive information.
If the credit card number or account number needs to be billed again in the future (such as for a recurring payment or subscription), the payment system recognizes the token associated with the card, rather than the card number itself.
Credit or debit card tokenization increases trust for businesses and significantly reduces the risk of sensitive information such as cardholder data being exposed.
How does credit card tokenization work for SaaS platforms?
Here are a few possible scenarios to consider:
1. Ecommerce Payment Tokenization
- A customer makes a purchase and uses their credit card to check out (e.g. 1923 1242 4629 2649).
- The card number is changed to a random sequence of characters (e.g. EUSH127ABD5562).
- The relationship between the actual card number and the token is stored in a separate vault.
- If the transaction is recurring (for example, for a monthly subscription) or a refund is required, the merchant can simply use the token rather than needing to store the sensitive card data itself.
2. Mobile Payment Tokenization
- When users of Apple Pay or Android Pay add a credit card to their mobile device, each of the card numbers will be tokenized and stored on the phone.
- When a purchase is made, the token is used instead of the payment card itself, thus adding an extra layer of protection for the transaction.
3. App Payment Tokenization
- Using applications to purchase goods is becoming more common (groceries, clothing etc).
- If your phone contains a token, these apps are unable to retrieve or access any credit card details.
- All bank details are locked down and hackers/fraudsters would be unable to commit an offense with the data available to them.
- Checking out to finalize a purchase is simple too as many apps are integrated to be linked directly with your stored shipping and billing information.
What are the benefits of credit card tokenization for SaaS platforms?
Tokenization decreases data theft and fraud, which means businesses are less likely to incur reputational or financial damage as a result of a data breach.
Merchants who utilize a tokenization process also give peace of mind by reassuring customers of their strong emphasis on protecting the sensitive information of the customer.
Tokenization also has additional benefits, particularly when combined with PCI-validated Point-to-Point Encryption.
In addition to making sure unsecured payment data never enters your organization’s systems and combating cybersecurity threats, tokenization helps with PCI compliance, saving both cost and time.
Tokenization Vs. Encryption
If you’re familiar with tokenization, you may have also heard of credit card encryption. Tokenization has several differences from encryption.
When data is encrypted, it is coded into a hidden language, similar to tokenization. However, encryption uses a mathematical formula which is possible to reverse-engineer, meaning encrypted sequences can be deciphered and risks exposing sensitive information such as credit card data.
On the other hand, tokenization turns a critical piece of data into a string of random characters that cannot be reversed - so if compromised, no meaningful data is exposed. The only thing a would-be hacker could possibly obtain is a list of token numbers which would be of absolutely no use to them.
Ensuring the highest security standard possible is a huge benefit in the credit card processing industry as tokenization adds additional layers of protection.
Other Benefits of Tokenization for SaaS Businesses
Implementing Tokenization keeps your customer data safe in transit or at rest, plus it helps reduce, and in some cases remove PCI audit scope.
To learn more about how CardChamp utilizes tokenization to ensure maximum security, get in touch here and we'll connect you with our support teams.
