What is payment tokenisation and why is it essential in a POS for eCommerce?

If you’ve been looking for ways to make payments in your online store more secure, you may already have heard of payment tokenisation. The growing popularity of new payment methods such as digital wallets or mobile payments has also led to new solutions being developed to protect users’ sensitive data in the digital environment. One of the most effective systems to do this is, precisely, tokenisation.

In this article, we’ll explain all the details about what it is, how it works, and why more and more online retailers are choosing to have a Virtual POS with tokenisation.

What is payment tokenisation?

Definition of tokenisation

Payment tokenisation is a security process that replaces sensitive bank card data with other, non-sensitive data known as tokens. Tokens themselves have no value or meaning but act as identifiers for the system, allowing it to retrieve the original sensitive data. Thanks to this, it’s possible to protect banking transaction data and prevent theft.

How does tokenisation protect your customers’ data?

Tokenisation is very simple to use: once enabled, the system converts the customer’s Primary Account Number, also known as PAN, into a unique and random code called a token. This token is used during the transaction in place of the PAN. This enables a payment to be processed without exposing the sensitive bank card information.

This process protects payment information to prevent fraud and reduce the risk of data theft in the event of attacks or security breaches.

Difference between tokenisation and encryption

You might be wondering what the difference is between tokenisation and encryption, as both systems are used to protect sensitive data. However, these techniques have different approaches and functionalities, and are not interchangeable.

On one hand, encryption transforms actual information into encrypted text using an algorithm and a key. This allows access to the real data, provided the key is available. To put it simply, it’s like locking a locker with a padlock: with the correct key, you can open it and access what’s inside.

On the other hand, tokenisation replaces the actual data with a code (or token) that has no value and only functions within the system that created it. It’s like having a vending machine in your office that only works with tokens. To use it, you first go to reception, provide your data and pay for the tokens. In return, you’re given uniquely numbered tokens that let you get whatever you want from that machine. However, outside your office, those tokens have no value or meaning. Only the internal system can link them to you and their value.

In short, encryption hides the data but it’s still there and can be accessed with the right key, while tokenisation completely replaces the data and only the system can reverse it.

Tokenisation	Encryption
Replaces the real data with a token that has no value outside the system	Transforms the real data into a code
Data is replaced by a token that only the system can link back to the real data	Data is hidden but still present and recoverable with the key
Can only be reversed within the system that created the token	Can be reversed if the key is available
Commonly used for digital payments, sensitive eCommerce data, and compliance	Commonly used for secure communications, such as emails and messages, and encrypted file storage

Benefits of using tokenisation in your eCommerce POS

Compliance with regulations like PCI DSS and PSD2

Tokenisation helps companies comply with current data protection regulations. For example, it ensures compliance with the PCI DSS security standard, which protects card data, and the basic EU payment regulation PSD2, which strengthens the protection of banking data in digital payments. It also ensures compliance with the GDPR, which regulates the processing of customers’ personal data to ensure it is used ethically, transparently and securely.

Complying with regulations helps avoid legal and financial penalties, increases customer trust, and protects your business’s reputation in the event of a data breach.

Increased customer trust by ensuring secure transactions

When customers know their sensitive data is protected by tokens, and therefore not stored or processed directly, their confidence in your eCommerce increases. In fact, according to our latest survey “Payment methods: the ultimate decision” from 2024, 67% of users state that security is the most important factor when paying online.

That’s why the sense of security conveyed by your online store has a direct impact on the user’s decision to buy and their likelihood of returning to make another purchase.

Simplifies the management of recurring payments and subscriptions

If you manage a business that relies on subscriptions or recurring payments, using tokenisation allows your POS to securely store the customer’s payment data and charge future payments without re-entering card details. For example, a gym charging customers quarterly can collect payment information when the customer signs up, and automate the following payments. The customer doesn’t need to pay manually again, and the business complies with regulations by not storing sensitive data. In case of cancellation, the token is deactivated to prevent future charges.

Why is tokenisation essential in a POS for eCommerce?

Adapting to the security demands of eCommerce

ECommerce constantly faces threats such as phishing – a sophisticated technique where a cybercriminal impersonates a trusted organisation to steal personal or banking data, which can be very hard to detect.

Ensuring online payment security has become essential, and having a POS with tokenisation is one of the most effective measures to protect transactions and prevent data theft, phishing, and other online threats.
Moreover, your commitment to protecting customer data also boosts the reputation of your eCommerce, which directly impacts customer loyalty and trust in your business.

Compatibility with multiple payment methods and global systems

Enhancing the shopping experience and customer loyalty

Tokenisation is essential to protect banking data in both online and in-store purchases. More and more consumers are turning to digital wallets like Apple Pay and Google Pay, as well as mobile payments and other alternative methods. Tokenisation easily integrates with these emerging payment methods, allowing your customers to pay however they prefer – conveniently and securely.

It also integrates with international systems and platforms such as Visa, Mastercard and PayPal, enabling you to grow your business globally while maintaining the same high security standards.

Finally, by ensuring a smooth and secure payment process, you strengthen customer trust and encourage long-term loyalty.

How to implement tokenisation in your eCommerce with an advanced POS

Implementing tokenisation in your eCommerce with an advanced POS doesn’t have to be a long or complicated process. Here’s what you need to do:

• Choose a payment provider that includes tokenisation. You must ensure that the payment gateway you use offers this functionality, as not all of them do. For example, the PaynoPain payment gateway, which is licensed by the Bank of Spain and complies with the highest security standards such as PCI DSS and PSD2, incorporates tokenisation to process transactions securely from the start.
  
• Review the technical integration documentation to learn how to correctly integrate the Virtual POS into your website.
  
• Test it in a secure environment to make sure it works properly before going live.
  

Advantages of working with a certified payment provider

Having a certified payment provider with standards like PCI DSS is essential to ensure that transactions are processed with complete security. These types of certifications guarantee that the provider meets the highest standards, which will make your job easier and keep you compliant with legal requirements.

Securing your eCommerce with payment tokenisation is a win-win

Payment provider for eCommerce

Having a payment provider that tokenises sensitive transaction data in your online store allows you to guarantee secure payments, improve customer trust, and enhance their shopping experience. It also helps you comply with current regulations such as PCI DSS, PSD2 and GDPR. In conclusion, it’s a solution that benefits both your business and your customers – a true win-win.

If you need a payment provider to facilitate this integration, at PaynoPain we offer a payment gateway with built-in tokenisation, regulatory compliance, multiple payment methods, and the most innovative payment solutions in the sector.

Are you looking for a secure payment gateway?

If you’re looking for a payment provider that complies with all regulations and guarantees payment security, fill in the form below and our team will get in touch with you.