Network Tokenization 101: An In-Depth Guide for Businesses

Network tokenization is now in great demand since this solution helps merchants prevent fraud, increases the speed of authorization rate, as the network tokens don’t expire as the card does, and reduces payment processing costs. Below we will explain in more detail what network tokenization is, what benefits token provision can bring to merchants, as well as examine how network tokenization works on the Akurateco example.

What is tokenization?

To get the concept of network tokenization right, it is important to delve deeper into what tokens are and how they work in payments. The term tokenization refers to replacing sensitive data with meaningless information. Usually, these are alphanumeric values of sufficient length that make it impossible to match these data. Otherwise, the card data will be available to hackers in plain text format.

What is network tokenization?

Network tokenization is the same token generated and stored on the side of the card schemes. Namely, in the case of network tokenization, card networks like Mastercard, Visa, and American Express store PAN –  a proxy for the 16-digit Primary Account Number, a long number on a card. Card schemes, including Mastercard network tokens and Cybersource network tokens, automatically generate these payment tokens in real-time when a person uses their card.

This technology was first applied at the beginning of the 2000s. Provider TrustCommerce developed a way to convert classmates’ customers’ bank card payment information into payment tokens to reduce the risk of storing vulnerable information. In the service he created called Citadel, payers could use them instead of real bank card details, and TrustCommerce took over the processing of transactions on behalf of the merchant. The new technology enabled online stores and other businesses to quickly accept recurring bank card payments without having to store customer payment information in the system. The mass introduction of tokenization was facilitated by the PCI DSS tokenization, adopted in 2004, which was primarily intended for banks and established requirements for the protection of stored and transmitted confidential information on bank cards.

How does network tokenization differ from full PAN tokenization?

The full Primary Account Number (PAN) is the information written on the credit card that you can store for recurring transactions. However, to store this information, you have to follow security rules so that this data is not stolen. With network tokenization, your data stays safe. For example, you make the first transaction – enter the full PAN, expiration date, and Card Verification Value (CVV). The system generates a network token that you can further use.

Below, you can see that the token doesn’t go further from the scheme and remains with Visa but not the provider. Next, we will talk about its work in more detail.

How does network tokenization work?

In payment method tokenization, sensitive payment information is replaced with unique identifiers (tokens), which are further used to identify the bank card in the system during the payment process. Although the process may vary depending on the payment software or provider used, the basic algorithm includes the following steps:

Data collection

The system gets the bank card number, expiration date, and CVV/Card Verification Code (CVC) (i.e., verification code) from the payer.

Network token generation

Instead of storing the actual data, the tokenization provider, or Service Provider (SP), creates a unique network token – an identifier that is linked to the original bank details.

Storage

Such a token, together with the corresponding information about the bank card, is stored in a secure database of the service provider, or software. At the same time, the original details are not stored in full.

Application

During payment, a network token is used instead of the actual card details. It is transferred between the participants of the payment transaction (acquiring bank, issuing bank, payment software, and other participants) and is used to identify the account and authorize the transaction.

Bank card tokenization algorithms may use various encryption and network token generation methods, such as symmetric or asymmetric encryption, hash functions, or other cryptographic technologies. The specific method may be proprietary to each service provider.

What challenges does network tokenization address?

Network tokenization addresses several challenges related to data security and compliance. Below, we are

Data breaches

By replacing sensitive data with tokens, network tokenization decreases the risk of data breaches and the potential consequences, such as financial loss, reputational damage, and legal liabilities.

Data privacy rules

Network tokenization aids businesses deal with data privacy rules like the General Data Protection Regulation (GDPR) and the PCI compliance tokenization by lessening the storage and processing of sensitive information.

Data stealing

Network tokenization makes it difficult for unauthorized individuals to get and steal sensitive information, even if they were to intercept network traffic.

Data compliance

Network tokenization can help organizations demonstrate compliance with data privacy regulations by reducing the amount of sensitive information they handle.

Data theft

By preventing the theft of confidential data, network tokenization helps to safeguard individuals and businesses from identity stealing, financial fraud, and other consequences.

Benefits of network tokenization

Tokenized transactions using network tokens provide many benefits to merchants and their customers. Let’s explore the advantages by analyzing Cybersource (a network tokenization provider) and Akurateco (a payment solution provider) as an example.

Fraud reduction

If you need to perform an acquiring transaction (e.g., purchase), one network token is not enough. In this scenario, it is accompanied by another dynamic value – the network token cryptogram, which is valid for 15 minutes. This advanced method of protection changes with each request Akurateco receives from Cybersource.

Up-to-date data

Since the schemes maintain the end-to-end tokenization process, network tokens are always up-to-date, even if the card details expire. For example, if your card is reissued and your PAN is changed, your network token will remain the same.

The bank issuer informs Visa of the changes. Accordingly, Cybersource sends this information to Akurateco so you don’t have to enter your card details, PAN number, and bank identification number (BIN) number again.

Uninterrupted user experience

Since Akurateco works through Cybersource and partners with Visa, all your credentials are stored here, which you can easily transfer. This means organizations and merchants have their separate login and vault in Cybersource, where their tokens are kept.

What types of businesses need network tokens?

Every business that sells online can benefit from card networks for the reasons listed in the previous section. However, there is a special utility for those businesses that offer subscription services.

These are based on recurring payments, but if the customer’s card expires, the payment will not be honored, resulting in a lapse or loss of revenue. Because network tokens dynamically update the latest details, these businesses are less likely to experience failed payments and decline customer churn.

How to implement network tokenization?

Implementing network tokenization involves several key steps:

1. Assessment: Businesses should conduct a thorough evaluation of their existing data security infrastructure and identify the sensitive information that needs to be protected.
2. Selection of a tokenization solution: Choose a tokenization solution that meets the organization’s specific needs, including security requirements, compliance standards, and scalability.
3. Integration: Integrate the tokenization solution with existing systems and applications. This may involve modifying existing code or developing new interfaces.
4. Data migration: Migrate sensitive data to the tokenization system. This process may require careful planning and coordination to ensure that information is not compromised during transaction processing.
5. Testing and validation: Thoroughly test the tokenization solution to ensure that it is working as expected and that sensitive information is being protected effectively.
6. Ongoing management: Continuously monitor and manage the tokenization system to ensure its security and effectiveness. This includes regular updates, security patches, and compliance audits.

Akurateco’s approach to network tokenization

Akurateco stands out as a white-label payment software provider that offers a range of custom products and services for businesses of all sizes. With a strong focus on security and reliability, Akurateco provides clients with a comprehensive suite of solutions, including network tokenization.

With a commitment to protecting sensitive data and ensuring compliance with industry regulations, our approach is aimed at minimizing the transfer of card data from the customers, merchant Application Programming Interface (API), and acquisition to Akurateco. The joint product of Visa, Mastercard, and American Express is made in international payment systems with the aim of increasing security in card data exchange. Akurateco is one of the first companies to work through Cybersource to assign a unique token instead of real card data for better security.

In the scheme below, Akurateco demonstrates how the technology works.

The customer enters a full card number on the merchant’s website, which is transmitted to the Payment System (Akurateco). We transfer the data to the Token Management Service (Cybersource). After, Cybersource requests an international payment system that issues a token for this card data. Finally, Cybersource transfers it to Akurateco. Then we store this token in our database and use it as a substitute for card data for various acquirers.

With such advanced security measures as PCI DSS Level 1 certification and regulatory adherence including GDPR, HIPAA, and PSD2, Akurateco ensures you can securely handle and transmit cardholder data. Start streamlining your payment processes today and forget about high operational costs and risks!

FAQ

What are network tokens?

Network tokens are a type of digital identifier used to securely represent a cardholder’s payment information in online transactions. They replace the actual card number (also known as the Primary Account Number or PAN) and card expiration date with unique network tokens that can be used in place of the number.

How can network tokenization benefit businesses?

Network tokenization improves business security by reducing fraud risk and saving from data breaches. It also enhances operational efficiency by simplifying PCI DSS compliance, decreasing payment failures, and other fraud-related costs.

What kind of businesses need network tokenization?

Network tokenization is useful for businesses that manage a large volume of online or digital payments, store customer payment information, or have a high risk of fraud. These feature e-commerce platforms, subscription services, financial institutions and fintechs, healthcare providers, hotels, airlines, travel booking sites, retailers with multi-channel sales, marketplaces and payment processors, gaming and entertainment, nonprofits, and donation platforms.

How to implement network tokens for my business?

Integrate tokenization into your payment system, replace card numbers with tokens, and test before launching. Update workflows to use tokens, and work with your provider to tokenize stored information. Communicate the change to customers, emphasizing security improvements. After launch, monitor performance, maintain compliance, and train your team on the new system.