- «Tokenization (data security)» (a Wikipedia article)
- «Payment Tokenization Explained» (a better explanation from the Square Payments website)
Payment tokenization is the process of replacing the traditional payment card account number with a unique digital token in online and mobile transactions.
Tokens can be restricted for transactions with a specific mobile device, merchant, or transaction type.
The tokenization process happens in the background in a way that is invisible to the consumer.
Tokens help to simplify the purchasing experience for consumers by largely eliminating the need to enter and re-enter the account number when shopping on a smart phone, tablet or PC.
Tokens can also help prevent fraud in e-commerce and m-commerce transactions by removing sensitive card account information from the payment process.
Finally, merchants and digital payment providers can store payment tokens in place of payment account numbers, this further enhances payment security.
Payment tokens can also include additional data fields to provide richer information about the transaction helping to improve transaction efficiency and security, and provide more information about the circumstances under which the transaction was initiated.