If your ecommerce store is going to succeed with customers and is to remain in compliance with recognized data safety standards, you must take steps to ensure secure credit card processing. 

Tokenization and encryption are two important mechanisms that can be highly effective in masking the information you store and transmit. Although these terms are often used interchangeably, they are not the same. 

Understanding each, and the role they play, can help you to determine which will be the more effective in bolstering your digital protections.

Payment tokenization explained.

Payment tokenization involves changing a vital piece of sensitive customer information, such as an account number, into a random series of characters. Should your systems be usurped by a digital bad actor, the tokenized data is rendered meaningless because of the random nature of how the series was created. 

In other words, no mathematical process is used to convert sensitive details, meaning that no algorithm can be used to decipher the tokenized code.

Instead, tokenization takes advantage of what is known as a token vault. This is the database where the connection between the token and the original payment information is stored. In general, encryption is used to secure the vault from infiltration. 

When the original data needs to be retrieved, such as when processing a recurring billing payment, the token is submitted to the vault’s indexing feature by the browser or application. In most cases, the end user does not even realize that this complex process has occurred, since it happens virtually instantaneously and without any intervention necessary on the user’s part.

Payment encryption explained.

In contrast to tokenization, encryption uses an algorithm to convert plain text data into a form known as ciphertext that cannot be read. When you want to return the information to its original plain text form, it is necessary to possess both an algorithm and a decryption key. 

One of the most common forms of encryption is a protocol called SSL, which is commonly used to safeguard information as it is being transmitted from one user to another on the internet.

In another form of this system known as public or asymmetric key encryption, two different keys are used in the process. The first, which is freely distributed, is called the public key. It is used exclusively to lock down the data. The second component, the private key, is necessary in order to “unlock” or decrypt the information.

Until recently, users of encryption experienced a certain disadvantage. This downside  occurred because the format of ciphertext differs from that of the original data, which sometimes lead to difficulties for the end user. 

The good news, however, is that current innovations are allowing for order-preserving, format-preserving, and searchable encryption schemes that protect data without sacrificing functionality.

The advantages of tokenization.

Although both data protection methods have their place, the benefits of tokenization have become clear to many company owners and thought leaders. In fact, several elements of tokenization give it the data protection edge for many organizations.

Data uniqueness is one compelling upside of tokenization. For every instance of data, this method creates a unique token every time. Consequently, the risk of pattern recognition is reduced, leading to more secure transactions.

Furthermore, key management is not necessary with tokenization. This is because tokens cannot be reverse-engineered by digital criminals. As a result, data is less vulnerable to breach.

In addition, the format of the tokenized data remains unchanged even though the information is rendered unusable. For instance, a 16-digit credit card number can be changed into a random 16-character series that can easily be integrated into existing systems, without added complications.

Finally, the credit card companies have responded to the surge in ecommerce by offering network tokenization (NT) services that replace standard credit card numbers with merchant-specific tokens. 

These 16-digit tokens are set up in collaboration with issuing banks, leading to higher authorization rates. The customer experience is seamless since NT’s are regularly updated by the card networks. Finally, because each token is specific to the merchant, instances of fraud are significantly lowered.

The optimal solution for data protection.

As you review what is best for your business when it comes to protecting the sensitive data you store and transmit, it is important to carefully consider your own unique organizational needs. For instance, some companies that are primarily concerned with data-in-transit scenarios may choose to go with encryption. 

Encryption can scale to accommodate large data volumes, making it ideal for larger enterprises that are contending with storing or transmitting a great deal of information. Additionally, encryption can work seamlessly with both structured and unstructured data, resulting in additional flexibility.

On the other hand, there are compelling reasons for preferring tokenization. For instance, the advanced security this method brings makes it particularly suited to companies that store sensitive data for extended periods of time. 

Additionally, tokenization’s keyless structure means that organizations no longer need to struggle with key management challenges. Finally, some service providers prefer to receive data in tokenized form and reward businesses for exchanging information in that way by granting them lower fees.

The truth is that data security threats show no signs of disappearing in the immediate future. Consequently, businesses like yours need to find effective strategies to safeguard the confidentiality and integrity of the sensitive customer information that they store, manage, and transmit. 

Both encryption and tokenization provide powerful tools that help to mask information from digital thieves. Although tokenization seems to be gaining an edge, only you can determine which protocol will best address your business’s specific needs and requirements.