What is Credit Card Tokenization?

Credit card tokenization allows you to offload sensitive credit card information from your system onto a 3rd party service provider. Many people expect it to be difficult to setup but is actually easier to implement than you may expect.
From a processing cost perspective, most merchants don't realize that you can lower your credit card processing costs for recurring payments if tokenization is implemented correctly.
This is another video in our educational series on credit card processing topics by www.Merchant-Accounts.ca.
0:06 - What is credit card tokenization?
0:33 - How does it work?
3:57 - How does tokenization improve credit card security?
5:23 - Uses for tokenization
7:16 - Lower processing costs for recurring billing transactions
9:47 - 3rd party tokenization (such as Spreedly)
12:40 - Making sure you can access your data
13:57 - Summary
More information and helpful articles can be found in the payments blog at www.merchant-accounts.ca/merc....

[@HamedAbdollahpour]

Very useful. Thanks

[@a.vidhyavichuzzz4886]

Super.. Your speech is very vell

[@MerchantaccountsCanada]

Thank you!

[@MocaGaming]

just had my replacement credit card stolen before it even got activated, had to look up what is this tokenization

[@amod10]

Thanks for explaining it nicely. I would like to know if I register my card to Payment Gateway company and further the same card can be charged by various customers? Just an example, I would like to provide a service where my card can be used by all of my family members, can you help me guiding me on the way I should go for the Tokenization process with any Payment gateway?

[@MerchantaccountsCanada]

Hello Amod, that's an interesting question. Since you are talking about storing the card to be used by your family members that's more of a customer (cardholder) sided request rather than a processing (business) side requirement. I feel in a situation like that, both Visa and Mastercard have created their own wallet products for the digital storage of credit cards. This is really a (very good) card-issuing side question, but one that's outside our expertise because we are more on the processing (merchant) side. The other option would be for you to call your issuing bank and see if you could just have your family members added to be extra cardholders. All the best with finding a solution.

[@raymeiers7949]

Is it accurate that a token (1) is correlated to a particular credit card number AND (2) linked to a particular merchant account? I am trying to understand how a token, if acquired by a bad guy, could not be used by the bad guy. Thank you for any reply.

[@mahmoudalballah3387]

Well, tokenization secures the actual card number if the token is stolen by someone it cannot do anything with it because to use it he must send the token to a payment processor as it is the main system who stores the token which cannot be happen
For instance I bought something from merchant A, when I do the checkout merchant A will send my card to Paypal asking for a checkout and a token the token then return to merchant A which will store it for any future purchases, if anyone get the token, he cannot charge the original card by that token because he must talk to PayPal with that token as it is merchant A which is impossible

[@anandsharma7430]

@@mahmoudalballah3387 So you're saying token+source are authenticated by the tokenization service, which means an attacker will have to spoof their identity and appear to *be* the same source as the one who used the token previously? In other words, they have to fake 2 things, one of which is really hard to fake (their identity as a merchant). Correct?

[@mahmoudalballah3387]

@@anandsharma7430 exactly

[@anandsharma7430]

@@mahmoudalballah3387 Thanks

[@philipsteels2832]

Have you ever seen someone get rebated back from being mis charged on reoccurring transactions? Visa v the lower interchange fees?

[@MerchantaccountsCanada]

Hi Phillip, this is an interesting question. If the transactions were mis-flagged or not coded properly that could be a reason why this occurred and wouldn't be your payment processors fault. For example, a subsequent tokenized transaction wouldn't qualify for recurring interchange. However, if you feel that your transactions were being submitted correctly and there was a mistake on the processing side (not yours) it's certainly worth raising this to your payment processor. There are other elements to this as well. For example, if your rate is a flat rate that doesn't fluctuate then any interchange cost reduction wouldn't be passed through to you as a merchant, which is a reason why it's good to be on interchange plus pricing. I hope this helps!