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Many businesses are working towards making the checkout stage of the shopper journey as seamless as possible through

enabling options such as one-click payments. However, to do this, payment data – particularly the PAN (Primary Account

Number) – needs to be stored so it can be accessed for future transactions without the shopper having to re-enter card

information. And this presents a challenge: How to store this sensitive data in a secure way?

The answer to this lies in tokenization, a major industry technology that is shaping the way merchants accept payments and use

payment data across online and in-store.

How tokenization technology works

Tokenization is a process of replacing sensitive data with

non-sensitive data. In the payments industry, it is used to

safeguard a card’s PAN by replacing it with a unique string of

numbers.

The payment token itself is the unique string of numbers – a

secure identifier generated from a PAN. Payment tokens are

automatically issued in real time and used online in predefined

domains and/or payment environments. Examples include:

only e-commerce, only for a specific merchant(s) and so on.

Tokenization

Payment technology guide

Therefore, tokenized payments are payments in which the

PAN is substituted by a token while performing a payment

transaction. With tokenized payments, the PAN is not

transmitted during the transaction, making the payment more

secure. This is the key strength of tokenization as a security

measure. Since the PAN is never compromised, there is very

little possibility that the token can be used for fraudulent

activity – even if a data breach occurs and payment tokens are

accessed.

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The tokenization payment flow

Adyen’s tokenization service securely stores customer card

data and generates a token that can be used by the merchant

to charge subsequent purchases, as shown in the diagram

above. Other Token Service Providers (TSPs) generate their

own tokens. This is the case for the major card schemes and

Apple Pay.

As an acquirer, Adyen is able to process tokenized payments for

online and/or contactless payment methods. A good example of

this is Apple Pay, which uses payment tokens both for online and

(contactless) in-store transactions.

Who it’s for

Tokenization is suited to any businesses with subscription- based

business models or which generate significant business with repeat

customers. Because tokens can be securely stored, and used to

enable “one-click” payments for future transactions, tokenization

is of particular interest to businesses that aim to give as smooth a

shopper flow as possible at the checkout stage.

Cardholder Merchant Adyen Card Scheme Network Issuer

Adyen Tokenization Service

PANTokenized Payment

Benefits for merchants

There are a number of benefits to tokenization for merchants

• Cost savings: Tokenization by Adyen takes on the burden of

managing cardholder data storage in a secured way, thus

reducing the costs involved with meeting and monitoring

Payment Card Industry (PCI) compliance.

• Increased security: If fraudsters manage to steal tokenized

data, they cannot use the stolen tokens to pay online since

they are unable to link the token to payment information

stored securely by the payment partner.

• Enabling one-click (or even “0-click”) payments for shoppers:

Tokenization enables merchants to offer shoppers the

possibility to save their payment details it in a secure

manner, so that the next time they make a purchase they

do not need to re-enter their payment data. One-click

payments significantly increase conversion at he checkout

page through streamlining they payment process for

shoppers.