How Does Tokenization Improve Your Online Store’s Payments?


Given that an increasing number of businesses are going online, the risk of cyberattacks will also increase. 2.14 billion people worldwide take advantage of online shopping because of its convenience.

Cybercriminals target businesses that do not take the proper steps to secure their customers’ payment information, resulting in jeopardized data, a damaged reputation for the business, and—in severe cases—lawsuits. You’ll see why it’s critical to safeguard your sensitive data once you understand the advantages of payment tokenization for online businesses.

How Does It Work?

Tokenization replaces a customer’s primary account number (PAN) with a token, a random string of numbers that is impossible to decrypt. When you use a token, the customer’s actual card number is never entered or stored on your system–or anywhere else, for that matter. You can only use the token for that specific transaction, not to make future purchases.

For example, when you buy something at an online store, the site may request your credit card information. Once you enter your 16-digit PAN, the site uses an algorithm to generate a corresponding token. That token is then sent to the payment processor to complete the transaction. The original credit card number is not stored on the site’s servers; only the token is kept on file.

Tokens Offer More Than Just Payment Security

Payment tokenization is a process of encrypting customers’ payment information to help eCommerce sites keep their data safe. Cyber attacks, like stolen data and credit card fraud, can damage businesses. Continue reading to see the main advantages that tokenization can have for digital companies.

Improve Customer Confidence & Trust

If a company experiences a data breach, it can seriously damage customers’ trust. Businesses know that customers will only shop online if they feel confident that the company can protect their personal information. After all, no one wants their sensitive information to be stolen.

A cloud tokenization service will allow your company to avoid having to save any credit card data in its internal environment. This will reduce the likelihood of customer data being stolen and revealed to cyber criminals. Your customers will see you as a dependable and secure business if you take their payment information security seriously.

Customers who trust their sensitive data is secure are more inclined to make repeat purchases and recommend your business to others.

Improve User Experience On Your Site

Some businesses need to offer in-app purchases, recurring subscriptions, or the ability to send tokens to multiple gateways. Others have more unique payment needs that you can meet with a tailored solution. Data security may be met by a flexible data security provider who can adapt to the demands of these use cases. Even if clients pay in various ways, a competent tokenization service can guarantee that your company’s critical data is safe.

Improved PCI Compliance

Tokenization can help businesses meet PCI DSS compliance requirements by eliminating the need to store PANs.

Being PCI DSS compliant is necessary for any business handling credit card information. Even though it might seem easy, most organizations find meeting the data security requirements time-consuming and expensive.

Less Risk

Although keeping your consumers’ financial information within your system may be more convenient, the consequences of a data breach might be devastating. Not only will your company be held responsible for any fines, but you will also have to pay damages if a cyberattack happens.

Cybercriminals target systems with little security that hold valuable data, and they then steal this information to either sell it or make sham purchases. According to the Ponemon Institute, the average data breach cost in 2021 is $4.24 million.

Tokenization doesn’t promise to stop data breaches, but it does lessen the likelihood of customer payment information being harmed if a breach occurs. The data you provided will be copied to a secure token vault, but the tokenized version will be available. Only authorized people can profit from tokens because they don’t contain valuable information. As a result, hackers have no use for them.

What Are ACH Codes?

You’ll need to know about ACH return codes if you plan on using tokenization. The ACH system is an electronic nationwide processing network for payments and transfers. Common uses for this system include direct deposit of payroll or Social Security benefits, automatic bill payments, etc.

ACH transactions are processed in batches, typically once per day. This means there can be a delay of one day or more between when a payment is initiated and when the payee receives it.

ACH codes are numbers identifying the transaction type being processed through the ACH network. There are three different types of ACH codes:

  • Entry class code: This code identifies the type of transaction being processed, such as a credit or debit.
  • Processing code: This code indicates how the transaction will be processed, such as whether it will be settled in real-time or batch.
  • Standard entry class code: This code is used to identify the originator of the transaction, such as a business or individual.

Knowing which ACH codes to use for each type of transaction is essential for ensuring that payments are processed correctly. Failure to use the correct codes can result in delays or errors in processing payments.

The Bottom Line

Tokenization is a highly efficient way to protect your customers’ payment information and improve the security of your online store. While some initial costs may be involved, the long-term benefits–such as increased customer confidence and improved PCI compliance–are well worth the investment.