How to Choose and Integrate a Payment Tokenization Provider

Payment tokenization is an excellent tool for any online payment processing system. It provides extra security and helps avoid PCI DSS compliance verification and other regulations. In this article, we explain payment tokenization and how it works. We also provide the necessary information to integrate it with your system.

Before this, we recommend you familiarize yourself with a guide for creating a custom checkout engine, where we explain the whole checkout system workflow, including tokenization: How to Create a Custom Checkout Engine from Scratch

What is payment tokenization?

Tokenization is replacing sensitive data with a non-sensitive equivalent called a token. Tokens have no value and cannot be exchanged for sensitive information. The sensitive data is stored outside the internal system the business uses, and it can safely use the tokens.

There are many tokenization use cases, and payment tokenization is only one of them. Similarly, many tokenization types and algorithms exist, but this article will focus solely on payment tokenization.

Payment tokenization is a process that allows sensitive payment information, such as card number, expiration date, and CVC, to be replaced with non-sensitive, irreversible tokens and then used for any further payment operations (transactions).

The payment system should not access payment data in any way (on the web form, on the server side, etc.) and should remain unaware of it. We will explain how to accomplish this below.

Before this, it’s crucial to note two main reasons for implementing payment tokenization:

1. Additional security
2. Avoiding PCI DSS compliance Let’s examine these points.

Tokenization and security

You’re likely building a secure and reliable system, but no one is completely safe from hacker attacks. Your system could be hacked, and your data could be stolen. If the data includes customer payment information, you’ll be in a difficult situation: you’ll need to reimburse customers for any damage, face lawsuits, and risk losing all your users. Your business may not survive such an incident.

On the other hand, if you’re using payment tokenization, potential hackers may only obtain non-sensitive tokens that don’t contain sensitive information and can’t be exchanged. These tokens are random strings with no value, so potential hackers can’t use them, and your customers will remain safe.

Tokenization and PCI DSS compliance

The second reason for implementing payment tokenization is to comply with the Payment Card Industry Data Security Standard (PCI DSS). PCI DSS requires that any system that processes, stores or transmits sensitive payment information pass a compliance validation.

Your system must meet 12 security requirements, which international payment organizations review regularly (annually or quarterly). This adds complexity in terms of development, maintenance, and legal aspects.

Preventing this headache is at the core of tokenization. By using it, your system won’t handle sensitive payment data, so it won’t need to comply with PSI DSS. Instead, the tokenization provider, already PSI DSS compliant, processes sensitive data and is responsible for its security and proper handling.

Choosing a tokenization provider

A payment tokenization provider is a PSI DSS-compliant service that stores sensitive payment data and provides tokens for interacting with it.

There are many payment tokenization providers to choose from. Consider your business needs, such as the tokenization algorithm and token schemes, security certifications, 3rd-party integrations, and pricing model.

We suggest selecting the most popular providers, like TokenEx, as they are reliable, offer a variety of features, and are easy to integrate and troubleshoot.

If you’re unsure what provider is best for you and need a consultation, feel free to contact us at [email protected].

Tokenization workflow

At first glance, tokenization may seem tricky, but it’s actually quite simple. There are two key points to remember:

1. Your system typically processes payment data in two places: (1) the form (web or mobile) where the customer enters their payment information and (2) the server (or API) that handles operations with this information.
2. Your system should not directly access payment info in either of these places.

Once the customer has entered their payment information, you need to exchange it for a token and use this token for any further operations involving their payment information:

Let’s add the details and examine how it works in a real-world application, using TokenEx as an example:

Step 1. The customer fills in the payment info using a form (web or mobile) with card details, such as card number, expiration date, and CVC. Step 2. The form sends the payment data to the tokenization provider without touching it (it can be achieved using an iframe). Step 3. The tokenization provider saves the payment information and returns the token to your form (so that your form only knows about the token). Step 4. The form sends the token to your server (API), which saves it for later use. Step 5. When processing any operation requiring payment information, the server replaces the previously saved token with real payment information on the fly (using a proxy) without touching it.

Remember that no part of your system should have real payment information. It is impossible to directly get, update, delete, or log it in the tokenization workflow. Otherwise, the purpose of payment tokenization will be lost.

Conclusion

In this article, we’ve explained what payment tokenization is, how it works, its benefits, including additional security and avoiding passing PSI DSS compliance, and how to choose a tokenization provider. We’ve also analyzed its implementation workflow in detail using a real-life example.

You may still encounter many challenges on your journey, just as we did while creating Eye4Fraud RapidCheckout, the smartest and fastest checkout on Earth. If you have any questions or need a consultation, please email us at [email protected].