Tokenization Definition

By Phillip Parker

Last Updated: October 7, 2013

Merchant Account Tokenization Explained:

What is Tokenization? Tokenization is a data security measure that replaces sensitive card and transaction information with a unique, random number (or “token”) that can be used in place of the real card data. Tokenization allows merchants to store a representation of a card’s information on-site (for tips, recurring billing, etc.) without actually storing the card’s information. The real card information is stored on a secure third-party server that can easily translate a “token” into unencrypted information before sending it to a processing network.

Tokenization removes the burden of data security from merchants, as they are never actually in possession of a cardholder’s information for longer than is necessary to complete the sale. This is compliant with the guidelines established by the Payment Card Industry Data Security Standard, or PCI DSS.

Tokenization Video Explanation

Use of this video does not constitute an endorsement of any kind by CardPaymentOptions.com.

About The Author

Phillip Parker

Phillip Parker is an independent card payment expert specializing U.S. and Canadian point-of-sale, e-commerce, and mobile payment acceptance. He has nearly two decades of experience in credit card processing as a journalist and consultant. Phillip is the creator of this website and has written over 1,500 articles covering numerous payment acceptance topics. He has also published critical reviews about most merchant services providers currently in operation.

Expert Guidance

Phillip has consulted businesses of all sizes from mom-and-pop shops processing $10K per month to enterprise level organizations processing in excess of $300MM annually. His specialties include:

– Merchant Account Statement Auditing
– Rate & Fee Negotiation
– Processor & POS Selection
– Software Integrations
– Risk Assessment
– Fraud Prevention
– General Processing Advice

Schedule a Consultation Here

Phillip’s Top Picks

Phillip has researched and reviewed over 1,000 merchant services providers over the last 15 years. He also owns multiple businesses that accept credit card payments. If you are looking for an ethical credit card processor that doesn’t hide fees or lock you into expensive contracts, see Phillip’s merchant account picks here.

In The Media

In addition his contributions on CPO, Phillip has also been quoted in several major publications such as The Los Angeles Times, INC Magazine, Miami Herald, Computer World, and numerous others. If you would like to interview Phillip for your story or podcast, please reach out here.

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