Compliance benefits of tokenization

Tokenization is a technology that enables a token to replace a credit card number in an electronic transaction. This token or reference number is meant to prevent the theft of the credit card number during electronic transmission and storage of a transaction. Since the reference number can't be used for transactions or fraudulent charges, there is little harm done if it's stolen.

The purpose of tokenization is to meet the Payment Card Industry (PCI) Data Security standard, which mandates that credit card data can't be stored on the retailer's point of sale (POS) device or it's databases after a transaction. This is one of the 12 points in the PCI DSS, which must be met by companies processing credit cards, including banks

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Many merchants have complained that in order to be PCI compliant, they will have to make expensive upgrades or replacements to their POS systems. Tokenization makes POS systems compliant without costly changes by using a 16-digit randomly generated number resembling a card number. The only numbers from the original card are it's last four digits, which become the first four of the token. Using only these four numbers, the token is still PCI compliant.

Tokenization was invented by Shift4 Corp., which developed a driver for POS software to generate and accept tokens. The only thing merchants have to do is install the driver on their POS equipment. The driver is substantially cheaper than replacing or upgrading POS hardware to encrypt card numbers, which would otherwise be required for PCI compliance.

Is tokenization effective? For the time being, it probably is. Of course, eventually some clever hacker will probably find a way to beat the system. But right now it offers both PCI compliance and some level of network security -- the best of both worlds for merchants using credit cards.

Rate this Tip To rate tips, you must be a member of SearchSecurity.com. Register now to start rating these tips. Log in if you are already a member. BROWSE BY TAG Compliance Counselor,   Security Token and Smart Card Technology,   Enterprise Identity and Access Management,   User Authentication Services,   Security Audit, Compliance and Standards,   PCI Data Security Standard,   VIEW ALL TAGS Digg This!     StumbleUpon     Del.icio.us    RELATED CONTENT Compliance Counselor The basics of enterprise GRC project management PCI DSS: The structure of a standard How to choose between source code reviews or Web application firewalls HIPAA compliance: New regulations change the game Data security best practices for PCI DSS compliance Key elements of a HIPAA compliance checklist A preview of PCI virtualization specifications Strategies for email archiving and meeting compliance regulations Information security forecast: Security management in 2009 End user Compliance: Creating a security awareness training program Security Token and Smart Card Technology Risk management must include physical-logical security convergence RSA researcher Ari Juels: RFID tags may be easily hacked Portable security storage device could replace OTP devices Can you combine RFID tag technology with GPS to track stolen goods? Security token and smart card authentication Hackers can target embedded smart card chips What should an enterprise look for in a password token and a vendor? Are smart cards insecure if Mifare Classic RFID encryption is cracked? What are good features to look for in access control software? Secure Computing SafeWord 2008 product review PCI Data Security Standard MasterCard increases PCI compliance requirements for some merchants PCI compliance requirement 1: Firewalls PCI compliance requirement 2: Defaults PCI compliance requirement 3: Protect data PCI compliance requirement 6: Systems and applications PCI compliance requirement 5: Antivirus PCI compliance requirement 4: Encrypt transmissions PCI compliance requirement 7: Restrict access PCI compliance requirement 9: Physical access PCI compliance requirement 11: Testing RELATED GLOSSARY TERMS Terms from Whatis.com − the technology online dictionary authentication server  (SearchSecurity.com) Chameleon Card  (SearchSecurity.com) key chain  (SearchSecurity.com) key fob  (SearchSecurity.com) key string  (SearchSecurity.com) national identity card  (SearchSecurity.com) security token  (SearchSecurity.com) smart card  (SearchSecurity.com) tokenization  (SearchSecurity.com) two-factor authentication  (SearchSecurity.com) RELATED RESOURCES 2020software.com, trial software downloads for accounting software, ERP software, CRM software and business software systems Search Bitpipe.com for the latest white papers and business webcasts Whatis.com, the online computer dictionary DISCLAIMER: Our Tips Exchange is a forum for you to share technical advice and expertise with your peers and to learn from other enterprise IT professionals. TechTarget provides the infrastructure to facilitate this sharing of information. However, we cannot guarantee the accuracy or validity of the material submitted. You agree that your use of the Ask The Expert services and your reliance on any questions, answers, information or other materials received through this Web site is at your own risk.