What is payment tokenisation?

Payment tokenisation is a powerful technique used to secure sensitive payment data during transactions. Instead of transmitting actual credit card numbers or other confidential information, a unique token is generated and used in place of the original data.

By using tokens, payment platforms can minimise the risk of data breaches and fraudulent activities. This is because even in the highly unlikely scenario that tokens are intercepted or stolen, they are useless to fraudsters as they lack any meaningful information.

How does payment tokenisation work?

Tokenisation is used by payment processors to enhance security for their merchant partners and their customers. The process of how tokenisation works is depicted in the infographic below.

When an online shopper initiates a payment through a payment platform their credit card details are tokenised. The tokenised data is then transmitted securely throughout the entire payment process, ensuring that sensitive information remains protected.

Unlike traditional credit card payments, where the primary account number (PAN) is transmitted during transactions, tokens replace the PAN with a unique token. It’s this process that reduces the risk of exposing sensitive card data during online payments.

What are the merchant benefits of tokenisation?

For online stores and other businesses that accept online payments, tokenisation has the following benefits:
  • PCI compliance: Tokenisation helps merchants maintain Payment Card Industry Data Security Standard (PCI DSS) compliance. By using Network’s Payfast ecommerce solution, we make sure you don’t have to worry about PCI compliance as we are compliant ourselves. 
  • Reduced liability: With tokenisation, merchants are less exposed to liability in case of data breaches. 
  • Streamlined checkout: Tokenised payments lead to faster and more efficient checkout experiences. 

What are the consumer benefits of tokenisation?

For consumers who shop and pay online, tokenisation has the following benefits:
  • Enhanced security: Consumers can trust that their payment information is safeguarded. 
  • Automatic card updates: Tokenisation supports automatic card updates, reducing declined transactions due to outdated card details. 
  • Increased approval rates: Issuers view tokenised payments as more secure, potentially leading to higher approval rates. 

What is Scheme Tokenisation?

Scheme Tokenisation, also known as Network Tokenisation, is a newer version of payment tokenisation that’s centrally managed by the card scheme, i.e. Mastercard and Visa, instead of the payment platform. This centralised management allows for efficient updates, reissuance and revocation of tokens when needed. As such, Scheme Tokenisation is more compliant and one may even say safer, as risk sits solely with the card networks and not with us, the payment platform, or you, the merchant. As the card scheme processes the tokenisation of the card details, the card details are never saved on our records and not processed by the banks.

Network are in the process of automatically activating Scheme Tokenisation for all their merchants to replace the normal tokenisation feature. This updated feature is being implemented through an?integration with the schemes and the acquirers, which takes place on Network's back end and doesn’t require merchants to?update their APIs.

Useful resources:
Payfast by Network is a payments processing service that enables South African merchants to receive payments from local and international buyers.
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