What is Tokenization and Multi-Merchant Tokenization?

Posted by Jayme Moss on Aug 2, 2017 1:00:00 PM

Multi-Merchant TokenizationIn one of our "Bill Gates meets Steve Jobs" moments a few years ago, the innovators here at Solupay changed the world with "Multi-Merchant Tokenization." OK, OK... perhaps comparing us to technology legends is a stretch,and maybe this concept won't revolutionize the world like Apple and Microsoft have done, but we did coin the phrase Multi-Merchant Tokenization, and it’s really not a hard concept to understand and see why it has been successful. Plus it has proven to be an added convenience for customers of e-commerce merchants, while making life easier for the merchant while providing a better end user experience.

Let's take a closer look at Tokenization and Multi-Merchant Tokenization.


What is Tokenization?

Of course, it makes sense that one of consumer’s top concerns with their payment information is its security. And with new technology on the rise, like mobile wallets, they are only getting more concerned.

Tokenization substitutes a token for valuable private information like a bank account number or cardholder’s PAN (credit card number). A token is a long string of random numbers that have no value whatsoever. When a transaction is made, a merchant never sees the customer’s private information – only their token.

So that eliminates two things:

  1. Merchants don’t have to store this sensitive data themselves, getting rid of some PCI regulations at the same time… which means less questions on the annual PCI survey!

  2. The data itself doesn’t get exposed any more than necessary, keeping consumer information more secure

And since just a single entity is in charge of security in the form of tokens, the idea is that more resources, tightly monitored processes,  and controls protect sensitive data. Even if hackers manage to get access to a token and its Credit Card Number as a pair, the algorithms should still be so complex that they can’t reverse engineer these transactions and steal the consumer’s data.

Added Benefits of Tokenization: A business that outsources their data via Solupay's tokenization program is able to complete a shortened version of the annual PCI DSS assessment, making compliance easier to manage and saving costs. Further, tokenization vastly reduces a merchant's risk if a data violation occurs. If a merchant's system is breached, the criminals would get the token numbers, which are essentially worthless.

What is Multi-Merchant Tokenization?

Here’s how the aforementioned revolutionary idea of Multi-Merchant Tokenization works:

  • A payment processor provides payment acceptance services to a number of disparate merchants (think separate legal entities). 
  • Each of those merchants encourages (but doesn’t force) their customers to “vault” (store) their information with them. When they come back, those customers can then check out with a single click…. and this is important… at any of the other merchant locations in that group or community of merchants. This provides a much easier checkout mechanism---- especially for mobile shoppers.

The separate entities could be a community, franchisees, association or ANY group of merchants. Just ask your processor if they support this… it is something that typically needs to be known at the time of setup. And it is only supported by a few processors today. Look for ones that support Multi-Merchant Tokenization for both direct merchant accounts and aggregation accounts.

That’s how Multi-Merchant Tokenization works in a nutshell. You can see why merchant's customers would love to have something like this that allows them to pay faster and easier. Perhaps it is not worthy of a Nobel Peace Prize, but we here at Solupay are proud of the concept and would love to discuss the benefits with our clients and prospects.

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