One of the primary concerns of any business should be to handle customers’ sensitive transactional data, especially if your company relies on recurring payments. Therefore, as a retailer, you must carry out this nerve-wracking responsibility. However, with the hundreds of tasks you have at your disposal, deciding which data protection method is the best can be difficult and confusing to figure out.
In the last few months, there has been an abuzz about the word card tokenization in the payment industry. This sudden traction is linked to the RBI’s rule for adopting card-on-file tokenization as an alternative to card storage. Card tokenization has been upraised as the future of card payments in a world wherein cybercrimes and frauds hinder the adoption of digital payments.
In this blog, we will talk about the nuances of card tokenization and why it has become a popular method for businesses to protect sensitive transactional information. But let’s start with learning what card tokenization is.
What is Payment Tokenization?
To understand payment or card tokenization, we must first learn what “tokenize” means. A token refers to an item that represents something else. For example, using plastic chips at a casino instead of real money. That is to say, tokens do not have a value of their own, but they can be exchanged for various goods and services.
Similarly, payment tokenization is a security protocol that safeguards sensitive data when your customers make digital payments. Instead of the sensitive data being openly transferred between different networks, it is carefully tokenized by replacing the card numbers and other cardholder information with algorithmically generated numbers. In this manner, the cardholder’s data is never exposed to undergo any fraudulence or cybercrime.
Card tokenization is considered one of the most efficient security methods as it adds an extra layer to the customers’ sensitive information. Now, let us move forward and learn how card tokenization works.
How Does Card Tokenization Work?
The process of card tokenization has involved multiple parties, such as merchants, issuers, card networks, customers, and token requestors, as it has been clear that this process replaces the actual card details with a one-time alphanumeric code which cannot take you to the original data.
Let us look at this run-down of what a real-time tokenized transaction looks like:
Step 1: In the first step, your customer purchases your product or service online by providing their debit or credit card data at the checkout page.
Step 2: Their card details are tokenized via a token service provider and sent to the merchant’s bank account after replacing the payment information.
Step 3: Further, the acquirer uses this token to request authorization from the card company.
Step 4: Your customer’s payment details are held by their bank in a secure vault. When the token is supplied by the card issuer and matches your customer account number, the bank verifies the transaction.
Step 5: Once the payment is successful, the token will be returned to the merchant. And on top of everything, future transactions made by the same customer will have a different token sequence.
Razorpay Enables Seamless Card Tokenization
Although, the Indian government, along with the Reserve Bank of India, has banned saving your customers’ sensitive card details. However, card tokenization is a useful measure to enable safety and convenience for your customers.
Payment tokenization makes it easy for small and medium-sized businesses to safeguard their customers’ transactional data without investing so much in expensive security systems. Tokenization helps merchants with much more flexibility in how they accept online payments. Moreover, it lets customers leave your website with an enhanced shopping experience.
Razorpay, the leading payment solution provider, acts as a token requester, connecting businesses to various card networks. Moreover, if the business is a token requestor, Razorpay is a layer connecting businesses with card networks. Sign up today to experience the future of payments with Razorpay.