In e-commerce, security is an aspect that is increasingly appreciated by merchants and consumers. This is why the term tokenization was coined a long time ago as synonymous with trust and security.
Any company that processes and stores card data has a number of security obligations. Failure to comply with this requirement exposes you to all kinds of fraud and claims from victims, and the resulting fines and compensation can be significant. PCI is a security standard promoted by some of the major card brands around the world, and its adoption has led to the popularization of card data encryption technologies.
Tokenization may not be as well-known as other concepts for network security, but it is easy to understand. That is why we wanted to make a post explaining what this system consists of, in order to answer the various questions that arise about it.
What is tokenization?
It is one of the best data protection strategies that can be integrated into various e-commerce payment systems today. Consequently, it quickly spread throughout the sector.
If we explain this concept from the very beginning, we will have to talk about tokens, those pseudo-currencies that replaced the real currencies in the first financial systems (we would have a comparison, for example, with casino chips). This representation or replacement of a particular value is at the heart of this tokenization process in payments that we are talking about today.
With the emergence of various types of online business and the development of digital technologies, it became necessary to create a system that would guarantee the protection of consumer data in any online shopping process. Tokenization reduces the number of systems that have access to cardholder information, thereby increasing security on the Internet. The card number or PAN (abbreviation for Personal Account Number) is protected by an algorithmic encryption system that produces a unique numeric code consisting of similar numbers (tokens) that replace the original during a transaction.
Discover our smart session DigiShares Platform
DigiShares provides a white label platform for digitizing securities (stocks, bonds, etc.), issuing them in order to raise funds for a project and long-term management of a group of tokenized investors. The DigiShares platform can be used for any type of fundraising (STO), but as a company DigiShares is focused on real estate projects. This document is also targeted at this industry. The DigiShares platform is white label, which means it is often sold to partners who offer the platform under their own brand.
The DigiShares platform can be used for fundraising, but it can also be used to tokenize existing real estate funds to create more liquidity among existing investors and make it easier to attract new investors.
The DigiShares platform provides much functionality, however, most importantly, it supports two main processes: (1) an issuance process whereby tokenized securities are issued to raise funds for a project, (2) the longer the temporary management of a group of investors holding the tokens, to document their securities ownership rights under the project.
For the issuance process, we maintain a tailor-made connection process where the KYC and AML parameters can be tailored to the specific jurisdiction of the issuer and investors. The investor has his own dashboard where he can view his tokens, communicate with the issuer, vote on relevant issues, such as how to renovate a building, buy more tokens, etc.
What is your role in e-commerce?
E-commerce tokenization seeks more security for any business and therefore a better user experience for any customer. As a rule, after the first purchase, the user’s card data is already in the system of a particular online store, so from the second purchase, ordering is carried out in one click.
This payment convenience and secure method improves the user experience and therefore helps to increase the conversion rate.
Likewise, more and more digital companies are basing their models on subscriptions or recurring payments, and with a single entry of card details, they are converted to tokens, and subsequent payments will also be processed directly using the token.
Something similar happens with online hotel or tourist reservations: this business model usually works with the first collection of card data to guarantee the reservation. This data must be stored by operators in accordance with security standards that are addressed through tokenization.
Tokenization when booking hotels
Let’s remember: trust, security, and ease of shopping online are key elements to securing the ultimate sale. But not only for the user: also for any merchant or company that can adapt tokens to various payment solutions, since they work with the most modern systems and processors.
Differences between security tokens and other methods
There are other data protection methods such as data encryption or field encryption, which consists of encrypting the cardholder’s data at the source, which is then decrypted at the final destination.
Both are used for the same purpose, although tokenization is indeed becoming the most profitable and secure solution. Unlike encrypted data, security tokens are not mathematically reversible with the decryption key, so the card data is never displayed and makes no sense to any hacker.
Something similar happens with data masking. Masked data still retains its usefulness for certain purposes, which is not the case with tokenization.