Tokenization - Cards and Online Payments

The volume of transactions conducted with general purpose credit cards (American Express, Discover, Mastercard, Visa, UnionPay in China, and JCB in Japan) totaled $581 billion in 2021, up 24.5% year-over-year, according to the Nilson Report.

However, credit card issuers, merchants, banks, and third-party transaction processors lost $28.58 billion to credit card fraud in 2020, which comes to nearly 7 cents per $100 in purchase volume. And the Nilson Report projects credit card losses will exceed $400 billion over the next 10 years.

In an effort to reduce those losses and keep pace with the rapidly evolving threat landscape, PCI DSS and Issuers around the globe adopt latest technologies to add extra layers of the security and Tokenization is on of them.

In the context of payments and cards, tokenization refers to the process of replacing sensitive payment information, such as a credit card number, expiry and cvv, with a unique, randomly generated token. This token can then be used in place of the sensitive information for transactions, without compromising the security of the actual payment information.

Tokenization can be used to protect sensitive payment data in a variety of ways, such as:

• In-app payments: Tokenization can be used to facilitate in-app payments by allowing customers to make purchases without having to enter their credit card information each time.
• Online payments: Tokenization can be used to protect sensitive payment information during online transactions by replacing the credit card number with a token before it is transmitted over the internet.
• Contactless payments: Tokenization can be used to protect sensitive payment information during contactless transactions by replacing the credit card number with a token before it is transmitted over the air.
• E-wallets and Payment gateways: Tokenization is used to protect the sensitive payment information of customer in E-wallets and Payment gateways.

The use of tokenization can greatly increase the security of payment transactions, as it makes it much more difficult for criminals to intercept and use sensitive payment information/data.

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