Tokenization is a practice where a random number or barcode replaces a credit card number in order to protect a person's payment information.
The practice has been around for a number of years, but of the eight million merchants in the United States who accept credit and debit cards only a few accept tokenization. CPR Tools Incorporated CEO John Benkert told WINK News that is because the implementation of the tokenization can be expensive.
"Look at it as back in the 80s when we had arcades and I’m probably dating myself but instead of quarters they gave us tokens," Benkert said. "It’s nice that you can just use a phrase or a code for instance at Target when the credit card information was stolen, it was stolen from the retailer. They were hacked into the retailer’s servers and they got the credit card information that way. There’s no information stored on the retailer’s servers when you use tokenization."
With tokenization, the person enters his/her credit card information into a bank or payment processor, which then replaces that number with a random number. The code is valid for a limited time. Benkert said even with tokenization, you need to be a smart shopper when deciding how to share your card information.
"Your identity, your data is very important to you. It’s very important to other people as well criminals, marketing people, retailers. You have to protect yourself."