The digitalization of commerce is a global trend. Since the ’90s, several e-commerce platforms became billion-dollar businesses, such as Amazon, eBay, Alibaba, and Rakuten.
In 2021, it is estimated that there will be 2.14 billion digital buyers spread all over the globe. Plus, e-commerce sales are expected to make up 18% of the global retail sales in the same period.
In this sense, the new trend of e-commerce card tokenization promises to leverage blockchain technology to deliver next-level payment processing, making it more profitable than ever before to purchase bitcoin. Let’s unfold the reasons.
What Does Tokenization Mean? – Explaining the Term
Although the term “token” became prominent with the rising popularity of cryptocurrency, it has a fairly simple meaning. In layman’s terms, to tokenize something means to substitute something or transform it into something else.
For example, if you are traveling to Las Vegas, you will certainly go to a casino and buy tokens to play slot games. In essence, you exchanged money for a representation of value, which are plastic coins they gave you in the casino.
When it comes to online payments, the difference is that tokenization creates credit card tokens to protect sensitive data (e.g., credit card numbers). In this case, the information is replaced with a set of numbers and letters generated algorithmically.
Consequently, credit card tokenization allows merchants to provide goods and services without having to expose customers to risk (e.g., theft of sensitive data) while giving the tokens real crypto prices.
Payment Card Tokenization Equals Better Security
Traditionally, when a card or mobile payment is made, the card number passes through various points in the authorization process. This increases the risk of fraud because this data can be intercepted at multiple points.
Hence, an increasing number of payment card issuers use tokenization to store the original number of each card in a secure token vault and substitute it with a unique tokenized number. As tokenized numbers have limited validity, they are useless when intercepted by hackers.
However, it is not easy to tokenize an entire credit card network, as there are expensive costs related to structuring and maintaining a multi-faced layer with different interfaces to process payments.
The security of customer data is not just a concern for retailers, banks, and credit card companies. Recently, the issue attracted the attention of regulators and the use of tokenization has become a recommended practice by the PCI DSS, the main security standard in the payments industry.
Hence, it is safe to affirm that tokenization is the right choice for retailers who want to provide the best user experience to the customer while maintaining the highest security standard.
Tokenization ensures the protection of circulating data, as well as stored data security. Accordingly, while the original information is safely stored outside the cloud (accessible only to a select group of authorized people), the correspondent token circulates along the payment chain.
Hence, in case of possible failures in the security system, any vulnerable information will be similar to a random numerical sequence of the token, protecting the original customer data.
Digital Wallet Security – Upgraded
Seen as the next step in the mobile payment revolution, e-wallets use tokenization to securely store consumer data. Thus, the user does not need to enter sensitive information to conclude each transaction, nor enter passwords to validate the transaction.
Mobile-first retailers who want to embrace new trends need a ready-made payment platform for digital wallets like Samsung Pay, Google Pay, or Apple Pay. The result for them is fewer chargebacks and more sales conversion.
Expedite Checkouts and Further Customer Loyalty
Undoubtedly, tokenization is a strategic technology for e-commerce merchants who want to create a rapid and straightforward user experience for their customers.
With secure data storage, transactions can be performed in just one click, which provides even more convenience for customers. Ultimately, more convenience leads to more purchases and more profitability.
Also, an intelligent market analysis to assess customer loyalty permits merchants to create personalized offers and loyalty programs. Such proposals are a great way to stimulate consumers and create a positive business cycle.
Tokenization is the process of replacing real data with equivalent data, with the same format and protected by an encryption key. With tokenization, sensitive data is stored encrypted in a highly secure environment.
For example, let us say a company needs to safeguard the name of a holder, bank account number, or credit card number that is saved in its database. In this case, the best option is to secure sensitive card data is transforming it into unintelligible through tokenization.
This way, the tokens are generated uniquely and randomly, with no relation to the customers’ original data. Thus, to access sensitive data, a hacker would need to have permission to access the security key obtained in the process.
This article was written by Julia Beyers
About the Author:
Acquiring a wealth of experience in writing articles on trends and prospects for the development of the game industry in the world I’ve found myself as a Freelance Journalist. I am writing now about blockchain and cryptocurrencies trends, sometimes covering the importance of bitcoin for various other industries.
Featured Image Credits: Pixabay