Andrew Reszka, Regional Head APAC, Verifi
With the preference of consumers for mobile payments continuing its rise, it is vital that the security solutions embedded in these new payment processes keep up with the trend. The Christmas season inevitably brings with it the unfortunate rise in fraudulent activity and chargebacks, which is why ensuring your payment processes are secure is of heightened importance. One way in which merchants are looking to secure their customers’ purchases is by using tokenisation.
The security protecting the confidential account information of customers has always been a top concern for merchants, especially with hackers now targeting businesses more frequently and effectively. However, this has arguably created a barrier to the more widespread adoption of digital payment technologies.
Tokenisation is believed to offer a secure payment solution that will overcome these security concerns, and the likes of Apple Pay have already begun to demonstrate its capabilities. So, what exactly is tokenisation?
Tokenisation in a Nutshell
Usually when you make a payment (digital or otherwise), payment details are exchanged between an individual’s phone and the point of sale terminal (POS), which is subsequently processed and sent to the card processing system. This means that sensitive customer payment information is stored in the merchant’s POS and filed, making it easily accessible to hackers in the event of a data breach.
Tokenisation technology replaces this sensitive account and card information with a non-sensitive token or placeholder at the time of the transaction. This token can then be used to identify the original account or card data by the holder of a master key, but to anyone else, the data will simply appear as a random configuration.
This means that when a customer swipes their credit or debit card in-store or online, their personal payment information isn’t stored in the merchant’s payment system. The result? The entire payment process can be kept secure.
Tokenisation can be seen used in payment methods such as ‘tap and go’, in-app purchases, as well as in-app virtual purchases (typically used within subscription model services). However, its security success is likely to see it replace traditional methods for point-of-sale, online, and mobile payments as well.
What Makes Tokenisation Secure?
Tokenisation acts as a new layer of security for digital and mobile payments. It provides merchants with internal security, because they no longer need to store customers’ sensitive payment information. This means that firstly, they don’t have to invest in as many resources to protect this data, and secondly, any parties connected to the business (employees, vendors and suppliers) will not be able to access it, minimising the business’ overall risk.
Tokenisation also provides improved security for customers. For example, in the event that a merchant’s sensitive customer data is hacked, the fraudster will achieve access to a bank of tokenised codes, but will be entirely unable to decipher them. Should the hacker attempt to use one of these token codes in any other environment than the one it was originally purposed for, the transaction will be declined immediately.
Further to this, tokenisation can be applied across multiple platforms, such as online payments, credit card payments, gift cards, and mobile payments, allowing merchants to secure all payment avenues for the customer.
As well as providing for an ever-improving customer payment experience, tokenisation is set to solve a lot of problems for merchants, particularly when it comes to securing sensitive customer information and preventing chargebacks. Adopting tokenisation alongside comprehensive chargeback dispute resolution technology and end-to-end fraud prevention is the best step you can take to providing a frictionless and secure customer experience, and minimise the burden of detecting and responding to chargeback fraud.