Tokenization- Way to go forward with Online Transactions

• Published Date: August 18, 2022

Tokenization is the procedure of substituting credit and debit card info with an alternate code, acknowledged as a “token,” which is exclusive to the card, token advisory, and device. With the way payments are done changing with every passing year, the demand for tokenization solutions will fetch providers more than $12,684 million by 2030.

This explanation of this concept, which seems somewhat complicated, becomes much easier with an example. Imagine that the system of tokenization is a book. When your card is transported to it, it is stored on a random page, and you are given that page number to find the card. This way, when you want to use that card, you provide the page number, and the book gives the card. With this procedure in place, someone who knows the page number the card is on may not access it, as they might not know what book that page belongs to.

How Tokenization Works in the Real World?

When it is applied to the real world, we see its recompenses. Let us imagine a website selling some products that also offers recurrent deliveries. Initially, when a customer shops from that website, they will present their card themselves, but for recurrent dealings, the details will be stored by the website for a monthly payment.

If the card info is stored wrongly, unauthorized personnel or even criminals can access it, causing an annoyance to the consumer and a serious problem for the merchant. To dodge this issue conveniently, tokenization is the way forward.

Carrying Out the Process

When a client introduces their card for the very first time, the payment platform gathers the info and transports it to the tokenization system, which will return the token to the website and process the payment. The token will be stored on the website, in association with the particulars entered through the process of registration.

For payments in the future, when the company needs to charge the customer, it just has to send the amount and the token to the payment platform. It will then source the token to the tokenization system and, in line, get the card number and perform the transaction for the website. With this procedure, the website need not store the actual card details to perform payments, and the entire payment process will be limited to between the tokenization system and the payment platform, both of which are armed with strong security systems.

Why Is Card Tokenization Considered Important?

Tokenization is an imperative step toward not just strengthening the digital payment industry but also safeguarding it. As we step into the age of digitization, the safety of payment data against unlawful usage is more significant than ever.

Few Important Points for Better Understanding:

• Customers feel safe about their procurements, because sensitive info is substituted by a unique card code, token requester, and merchant in the transaction. Fraudsters will be uninformed of one’s personal info, as a result of this.
• This tokenization process will give extra protection by encoding the card details and improving customer trust in using digital payment methods.
• Customers choosing tokenization can complete transactions without entering their card details every time. Generally, it is the right move for user convenience and fraud prevention.
• Card details will not be revealed because suppliers will not record such data; as an alternative, there will be random numbers stored in the database of the merchant.

Tokenization and COVID-19

Keeping in mind the impact that the current COVID-19 has had on cybersecurity, these safety features are more significant than ever before. After the outbreak, cybercrime has hit the roof, as both industries and their customers sought to make all types of transactions online. This clearly indicates that an increasing number of people’s card details are being processed and stored by websites, giving opportunities to fraudsters and cyber criminals. Consequently, security solutions, such as tokenization, are perhaps more significant than ever, as they guarantee the client that their sensitive info is safe, helping form trust and allegiance between businesses and customers.

How Will VAPT Play the Role?

With the pandemic driving an enormous increase in online sales, the issue of security is becoming additionally prevalent. Consequently, a snowballing need to strike a balance between safety and suitability has emerged.

Throughout transactions, customers offer sensitive financial info, raising the menace of payment failure. Consequently, because of the safety concerns, contactless payments, for example, cards and mobiles, are becoming increasingly popular, allowing fewer transaction steps. Vulnerability assessment & penetration testing is an automated inspection technique for network devices, systems, and servers, to discover weaknesses and configuration matters that an attacker could play upon.

Open Your Eyes, Frauds on the Rise

A survey by the ACFE reveals that there has been a 77% increase in the incidence of online fraud since the outbreak of the pandemic, and it is expected to continue to increase. This surge has been witnessed by nearly every kind of business, with the largest being in insurance fraud, financial statement fraud, loan and bank fraud, and identity theft.

An Increase in E-Commerce Activities

Social distancing and quarantining resulted in an increase in e-commerce, as clients and businesses sidestepped physical contact. 67% of the clients increased shopping online due to the contagion; thus, e-commerce expenditure increased to $840 billion in 2020.

In the flood of transactions, scammers hope to slip under the scanner. 68% of the anti-fraud professionals saw a surge in payment fraud. Criminals use stolen info, unauthorized credit cards, and digital wallets to make fake purchases, leaving customers with the bill.

The e-commerce boom has not just given fraudsters more transactions to hide, but also presented additional "newbies." Inexpert consumers and businesses are less aware of, therefore more susceptible to, the potential security risks.

Broad Availability of Federal Financial Assistance

For providing emergency relief to businesses stressed because of the outbreak, the government of the U.S. has passed numerous financial assistance bills, such as the Small Business Association's Economic Injury Disaster Loan Program and the Small Business Association's Economic Injury Disaster Loan Program (PPP). 62% of the businesses got financial aid, including over 5.2 million individual PPP loans in excess of $525 billion. The application, processing, and circulation of the unexpected funding took place in record time, to counterbalance the pandemic conditions.

The momentous count of recipients, along with the comparatively minimal oversight of applicants, shaped a prospect for fraudsters to exploit the system to obtain "free money" for their own gain. Tactics included the identity stealing of a genuine business and usage of the info about PPP recipients, to pose as a lender asking for further details about loan applications or forgiveness, to scam businesses beyond sensitive info.

A large number of closed or dormant businesses also offer easier targets for identity theft. Many businesses are working with smaller, overworked, or unfocussed staff, or one deprived of other resources that might, else, help keep their identities safe. This makes it rather easy for criminals to snip sensitive business info and use it to falsely apply for a loan.

How Fraudsters Exploit Remote Working Environments through BEC

While technology can help remote employees execute their duties and stay connected, telecommunication also raises security challenges. The pandemic additionally intensified cyber frauds, as clients, businesses, and personnel hurriedly attuned to new technologies, a virtual gift to hackers.

The count of cyber frauds, including phishing and malicious software, increased the most during the pandemic. 74% of the organizations had a phishing attack in the past, witnessing a 14% YoY increase in 2020 compared to 2019. Phishing can take numerous forms, such as impersonating a genuine user and creating a fake site to get login details or customer information.

Spiteful actors trick victims through e-mail into transferring funds or data to the offender's account. Business email compromise (BEC) involves sending a fake email from a familiar-appearing source, a vendor, merchant, bank, or high-level employee, requesting an urgent transfer.

The FBI received in excess of 19,000 complaints of BEC in 2020, costing nearly $1.8 billion. Criminals adjust their social engineering methods to interfere with the business payment systems.

What Is Take of RBI on Tokenization?

As India approaches a digital tipping point, to evade fraud and secure consumer info, its success and failure will be contingent upon the ecosystem’s collaboration capacity.

The RBI’s recommendations on tokenization for credit/debit prepaid card transactions through mobile and tablets permit stakeholders to examine tokenization for contactless dealings at POS terminals and in-app payments.

All SaaS Should Be Tokenized

The emphasis of this piece is to highlight the significant business models that social tokens and non-fungible tokens (NFT) allow for services, software, and creators, without third-party investment. Tokenized access and subscriptions look like continuing experiments with the tech, along with the numerous advantages over conventional SaaS. There are also other important benefits that tokenized economies can deliver to services eager to decentralize, such as governance. With the rapid digitization and the rising focus of people on new kinds of payment methods, most SaaS and creator productions should tokenize payments to their services.

Tokenized services are particularly influential for creators, letting them focus on providing a decent service, finding customers who are looking for a service, and concentrating on bringing that client value. Similarly, this is good for clients since they can pay a smaller amount and have a better experience. So, everybody wins!