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What Small Businesses Need to Know About Credit Card Tokenization

The rise of online payments is a game changer. It’s helping small business owners like you connect with more clients while getting faster payments than ever — but it also means taking on the responsibility of protecting more data. To safeguard your clients from hackers, you need to choose an online payment system that offers credit card tokenization like PayGround.

So what is credit card tokenization? And how does credit card tokenization work? We’ll explain the ins and outs of this cybersecurity process, then guide you through 5 of its many benefits.

What Is Credit Card Tokenization?

Credit card tokenization is a process that replaces sensitive credit card information with a unique string of numbers and letters. This alphanumeric code is called a “token.”

Once a token is generated, it can be used to make any purchase on your payment platform — but not anywhere else. The token is meaningless to all other merchants.

Tokenization cuts down on credit card fraud by ensuring that actual credit card numbers, CVV codes, and other data are never directly used in transactions. It’s like using Monopoly money, arcade tokens, or poker chips to represent cash. Even if a token falls into the wrong hands, actual money or data won’t be lost.

How Does Credit Card Tokenization Work?

The whole tokenization process occurs behind the scenes. You and your clients won’t actually see it happening, but there’s a lot taking place to keep your online payments secure.

Tokenization begins when a client enters their credit card information. That’s when your online payment solution assigns that card a token. At the same time, the sensitive data is sent to a highly secure virtual vault — one that’s separated from the payment platform — where it will remain safely stored high up the security ladder.

For the day-to-day transactions taking place, your payment system only uses the token. Much like a URL tells your browser where to take you on the internet, the token gives your merchant system the secret route to process the payment, using a language only it understands.

For all future transactions, your online payment system only needs to use the token.

The entire credit card tokenization process happens quickly, allowing your small business to receive funds faster, usually in less than three business days.

5 Ways Credit Card Tokenization Can Benefit Your Online Payment Collection

When you want to build a trustworthy brand, choosing a merchant service provider that uses the credit card tokenization process is a smart move. These secure payment systems can help you create an online patient experience that’s not only more convenient, but also more secure and reliable.

Here are five specific ways that tokenization can benefit your small business and its online payment collection process.

1. It’s Safer Than Encryption

“Encryption” is another cybersecurity term that you may hear a lot in reference to online payment systems. In this process, debit and credit card data is encoded into a text that only authorized parties can decipher.

While encryption certainly is useful for some needs, the code isn’t completely unbreakable. Payment information isn’t totally locked away. It’s simply scrambled or translated into a secret language, so if a particularly talented hacker steals data, they can eventually decipher what the code actually means.

On the other hand, tokenized information is not reversible. Client information isn’t simply masked — it’s tucked away in a whole other vault. If hackers were to break into the online payment system, they’d simply find meaningless codes and cardholder data would remain safe.

As hackers become more sophisticated, it’s increasingly necessary to use tokenized payment solutions like PayGround for small businesses. These advanced systems can best protect your clients and greatly reduce the risk of accepting online payments.

2. It Meets the Highest PCI Compliance Standards

PCI compliance is required for all merchants that handle credit card transactions. To be compliant, merchants must meet a set of strict standards that serve to protect cardholder data.

PayGround makes it easier for small businesses to meet these standards by tokenizing sensitive data, in addition to taking a number of other security measures, like using hashing algorithms and offering anti-fraud tools.

This doesn’t just benefit your customers. This also helps your business effectively avoid enormous fines, which can cost you anywhere from $10,000 to $500,000 per month of non-compliance.

3. It Allows For Safely Stored Payment Information

Tokens are extremely safe to store on online payment platforms. After all, they’re just random jumbles of meaningless letters and numbers — the real information is in a vault of its own.

With a tokenized payment solution like PayGround, users don’t have to re-enter their payment information every time they purchase a product or service from you. Instead, you can offer one-tap or completely contactless payments, while staying confident that the actual data is secured.

Stored payment methods are a big win for the customer experience, especially now that the majority of consumers are using at least one form of touch-free payment on a regular basis. Whether you’re issuing recurring or one-off online bills — with or without credit card terminals — tokenization allows for greater convenience and faster payments, without sacrificing security.

4. It Fosters Client Trust

When your business uses a merchant system that offers credit card tokenization, your online payment processes naturally earn the trust of clients. But even more importantly, tokenization ensures you don’t lose that trust.

Data breaches are extremely damaging for a company’s reputation, whether your business is large or small. Over 80% of U.S. consumers stop shopping with a company for several months following a security breach — and 21% never return.

Tokenization can help your business continue fostering trust, loyalty, and growth for years to come.

5. It’s Compatible With the Future of Payments

Credit card tokenization can help your business stay secure in the long-term. It’s a cybersecurity process that’s compatible with all forms of digital payment methods — not just credit card payments.

Whether your clients want to pay online with credit cards, debit cards, or ACH, PayGround can support the tokenization of their payment information.

As online payments continue to advance in the near and distant future, your tokenized payment solution can continue to offer you and your clients top-tier protection.

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