Tokenisation: A brief introduction to its history and how it works.
Unsure about tokenisation?
Here is a guide to its history and how it facilitates customer experience today.
While tokenisation might seem like a relatively new concept, it’s really not. The original concept can be traced back to “spintria” in the Roman Empire. These were copper tokens, exchanged in order to receive certain goods or services. The same concept applies to gaming tokens in older arcades.
Tokenisation for the digital transaction industry came into use in the 1970s, with surrogate key values in databases first being used in 1976. This surrogate key would replace information with a token value, allowing for faster processing and increased privacy.
It’s this focus on privacy that has caused the boom of tokenisation within the payment industry.
How does tokenisation work…
There are five key parts to tokens in card payment processing:
- Cards are swiped or inserted into the POS machine (with PIN verification), or the card details are entered into an e-commerce site.
- The site or POS machine sends the Primary Account Number (PAN) to the relevant card tokenisation system.
- The system generates a 16-digit number to replace the PAN. It records this replacement in secure servers.
- The token is returned to the POS system or e-commerce site, which is then used to represent the users’ card within the sellers’ system.
- The token is then sent to the payment processor, who detokenises it, views the original number and then processes payment, allowing the sale to go through and be recorded.
While it may seem complicated, the foundations of tokenisation have existed for centuries, and are incredibly useful for secure and seamless payments. It’s not surprising that tokenisation has been incorporated into POS platforms and why it sits at the heart of our omni-channel payment solution. It provides the security and customer insights needed to deliver secure, fast and engaging customer experiences. For the customer this means they don’t have to identify themselves every time they make a purchase and for merchants it speeds up the transaction process.
In addition to these benefits, because a token remains unique to an individual customer, it provides the required tool for merchants to offer loyalty schemes, incentives across any channel.
October 1, 2019