Card Tokenization

Future Proof Your Vaulting Setup With Portable Credit Card Tokenization

Vaulting and tokenizing credit card data is an important part of any payments strategy, and it also comes with a unique set of challenges.

Written by
Jordan Chavis
Publication Date
February 20, 2024
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“The world of payments is complicated” is the understatement of the century. 

Keeping payment data on file for future charges makes good business sense, especially if you are leveraging a subscription-based model. 

But building a payment vault in-house? Less than ideal. 

Payment vaulting solutions and built-in tokenizations processes have greatly simplified payment security for merchants over recent years. These solutions do all the hard work for you, reducing friction on your end to protect card data while alleviating the burden of PCI compliance. 

As new regulations and fraud risks pop up daily, adapting to the evolving realm of payments is crucial. 

Yet, despite the ever-occurring change in the payments space, one thing remains constant — the need for reliable vaulting and tokenization solutions.

Managing Cardholder Data

Have you thought about the way you handle cardholder data recently? If not, let's explore some reasons why you should take a second look at how your business is vaulting card data. If you're wondering what credit card tokenization is, you're in the right place too. We'll cover the basic explanation here.

Let’s get right into the concept of a vault and what makes credit card tokenization important.

Key Tokenization & Vaulting Terms to Know

Tokenization is the process of replacing sensitive data, like credit card numbers, with non-sensitive tokens, ensuring security during transactions. These tokens have no intrinsic value and cannot be reverse-engineered to retrieve the original data. 

Vaulting, on the other hand, involves securely storing sensitive information in dedicated, highly secure storage systems or services, like credit card vaults. These vaults employ robust encryption and access controls to safeguard data, often ensuring compliance with industry regulations. 

Both methods mitigate the risk of data breaches and fraud by protecting sensitive information from unauthorized access and exploitation.

Let’s take a look at some more specific terms to understand tokenization in today’s modern context:

What is Credit Card Tokenization?

Credit card tokenization (commonly referred to simply as tokenization) enhances the security of credit card transactions by replacing sensitive cardholder data with a unique identifier called a token. 

Tokens are randomly generated alphanumeric strings with no intrinsic meaning. The numbers and letters used in the token have no mathematical connection to the actual payment data.

How Credit Card Tokenization Works

While credit card tokenization is about making cardholder data more secure for both the merchant who would like to continue to accept payments, there are a series of steps that take place before and after a transaction.

  • Data Collection: When a customer provides their credit card information for a transaction, the data is collected by the merchant or payment processor.
  • Token Generation: Instead of storing the actual credit card number, the merchant or payment processor sends the card data to a tokenization system. This system then generates a token that represents the credit card information.
  • Storage and Usage: Credit card tokenization allows a business to store a customer’s card data in a secure, managed vault. It uses randomly generated tokens as a substitute for sensitive data, and then uses those tokens to process a payment transaction. This can happen in a single instance, or for all future transactions with a customer’s credit card.
  • Decryption: When a transaction needs to be processed, the token is sent back to the tokenization system, which decrypts it to retrieve the original credit card number. This allows the transaction to proceed without exposing the sensitive credit card data to potential security threats.

By using tokenization, merchants and payment processors can significantly reduce the risk of data breaches since the actual credit card numbers are not stored in their systems. Even if a hacker were to gain access to the tokens, they would be meaningless without the corresponding decryption mechanism, keeping customer information safe from potential bad actors.

Universal Tokenization

Universal tokenization is an approach to tokenization designed to work across multiple platforms, systems, or applications. For payment security purposes, universal tokenization provides a standardized method for replacing sensitive information, such as credit card numbers or personal identification numbers, with tokens that can be used interchangeably across different environments.

Key features of universal tokenization include:

  • Interoperability: Universal tokenization systems are designed to work seamlessly across various systems, databases, and applications, regardless of their underlying technologies or architectures. 
  • Standardization: Universal tokenization typically adheres to industry standards and specifications to ensure compatibility and interoperability among different tokenization systems. 
  • Scalability: Universal tokenization solutions are scalable, allowing organizations to tokenize large volumes of data efficiently and accommodate growing data processing requirements. 
  • Security: Like traditional tokenization approaches, universal tokenization prioritizes data security by replacing sensitive information with tokens that have no intrinsic value. 
  • Flexibility: Universal tokenization systems offer flexibility in terms of deployment options, integration capabilities, and customization features. 

As a whole, universal tokenization plays a crucial role in enhancing data security, promoting interoperability, and facilitating data management across diverse environments and systems. 

What is a Standalone Credit Card Vault? 

A standalone credit card vault refers to a secure storage system or service that is specifically designed to store credit card information separately from other systems or applications. 

This type of vault operates independently and is often used by merchants, payment processors, or service providers to securely store sensitive credit card data for future transactions or recurring payments.

What makes a standalone credit card vault especially beneficial for merchants is the highly secure environment independent from other systems and applications. Plus, these vaults are often designed for compliance, and many even offer advanced integration capabilities to increase compatibility with your existing payment infrastructure.

Tokenization Of Yesterday

Obviously, credit card data is important to merchants, and having payment methods on file for future charges makes good business sense. This is particularly true if you have a subscription business. Let's explore how companies historically would have made this part of their credit card processing strategy.

If merchants wanted to do this themselves, in most cases, they had to build it internally. This meant taking on the full responsibility to maintain PCI DSS compliance. It is a monumental effort for small internal teams to pull off this feat. Usually the types of companies that could afford a large payments team to deal with this were internet household names — like eBay or Uber.

The good news is this process works in a very different way now than it did when people first attempted to take payments online.

Challenges with Today’s Tokenization & How Payment Orchestration Helps

Who’s in control of your sensitive data?

A single processor or PSP does not give you full control over your customer payment tokens. As such, the portability of a vault and tokenized payment data is a crucial feature to prioritize when selecting providers to assist with your vaulting and tokenization needs. 

Unfortunately, if you are relying on a sole PSP to process your tokens and transactions, we have some bad news — you may be unable to access those tokens directly without the PSP as an intermediary. 

It’s a common scenario to request an export of your customer credit card data from your processor. This request is often met with a large fee or long delays.

To make matters worse, there’s usually a good reason you’re requesting payment data and likely a tight timeline. The data being locked away is likely to cause a headache for the project at hand.

By comparison, agnostic or impartial providers allow you to store tokenized payments in a universal vault, and use the payment processor of your choice. With 70% of merchants desiring a multi-provider approach to payments according to 451 research this opens up a world of possibilities for business operations because not only can you switch PSPs when you want but also transact with any mix of them that makes sense for your business needs. 

This can be a critical advantage if you take payments (or plan to) in more than one region, as not all PSPs are the best option for every customer or region. If you’re looking for a flexible payment vault that allows you to move your customers’ data from one system to the next without having to worry about PCI compliance, then you should explore agnostic payment orchestration providers like Spreedly.

Everything is portable, and you're still using the same aggregator layer. You're in control of your tokenization strategy, and you don't have to rely on your processing partners.

Beyond the flexibility at the gateway level, you also get lots of bonus benefits if you choose a Payments Orchestration layer to handle your vaulting. Not only do you get the flexibility of taking and storing payments, you can send them to any number of endpoints after that.

Does that include fraud and risk tools? You bet.

Payments Orchestration includes all kinds of things that might be useful to you and your business. In addition to flexibility, you also get the ability to optimize your payments further and do cool things like routing payments.

The Need For An Advanced Vaulting Solution

To meet the evolving needs and demands of today’s modern payment ecosystem, Spreedly has developed an Advanced Vaulting solution. The Advanced Vault combines modern lifecycle features, data-enrichment, and network tokenization to optimize all of your payment methods. 

Optimization lies at the core of the Advanced Value, ensuring merchants have access to the rules and configurations necessary to increase acceptance rates, lower costs, and improve payment experiences. 

Plus, Spreedly’s Advanced Vault removes the complexity of in-house and multi-provider vault maintenance. With Spreedly, you gain access to a full suite of features that keep your payment methods fresh and maximize the value of your vaulted data. 

The best time to think about the future of your tokenization needs is yesterday. 

To upgrade your vaulting setup for modern efficiency, get started with Spreedly today.

Download the Tokenization eBook Below

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