Supercharge Tokenization & Vaulting with Payment Orchestration: Enhanced Security and Compliance

Key Takeaways:

• Stronger Security: Tokenization and vaulting protect sensitive data, reducing the risk of breaches, especially for card-not-present transactions.
• Compliance & Liability Protection: Tokenization helps meet PCI DSS standards, minimizing regulatory risks and legal costs.
• Scalable & Flexible: Easily adapts to transaction growth and new security needs without disrupting existing systems.
• Vendor Flexibility: Owning the solution prevents vendor lock-in, allowing businesses to switch providers and reduce costs.
• Practical Uses: Ideal for e-commerce, BNPL, and digital wallets, enhancing security and efficiency for recurring and stored payments.

Earlier this year, in May, the PPI of 560 million Ticketmaster customers was leaked in a data breach. What’s worse, the breach wasn’t discovered until the cybercriminals responsible listed the information for sale online. And they’re not the only ones; these breaches happen more often than you may realize. In one survey, more than 80% of respondents said their organizations experienced at least one payment transaction fraud over the last two years—with an average incident rate of nearly $150,000.

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More than 80% of respondents said their organizations experienced at least one payment transaction fraud over the last two years—with an average incident rate of nearly $150,000.

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What’s happening? Sensitive payment card information and PII are at a higher risk than ever thanks to data breaches and fraud. Today’s cybercriminals are quick to evolve their tactics to get past safeguards. Even strict adherence to industry standards isn’t a foolproof defense—you’ll need to remain vigilant and conduct regular system updates to counter any threats.

We frequently recommend implementing tokenization and vaulting, AKA vaulted tokenization to our clients who need to protect data. Adding these security measures to your payment processing system can protect sensitive payment information from common data breach methods, like malware or phishing attacks (74% of cybersecurity incidents include human elements, like clicking on a phishing link). 

It’s important to note that this article will focus on CNP (card not present) transactions, where tokenization and vaulting are critical to prevent fraud and enhance security. 

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Network Tokenization vs. Payment Tokenization: Key Differences

First, a quick definition of a vault: a vault, or payment vault, is a digital system that stores sensitive payment information you don’t want criminals to access. Siloing payment information from the rest of the data environment improves security and lessens PCI DSS scope. A token then replaces the stored PII to complete transactions quickly and securely.

Said token is a digital, unique piece of data that replaces actual data (like a credit card number). While there are many types of tokenization, the primary forms used in payment processing are:

• Payment tokenization: wherein sensitive payment data is replaced with a unique token identifier to process an individual transaction. Tokens can be issued by a company’s proprietary software solution or via a third party, such as a payment gateway.
• Network tokenization: refers to the process by which tokens are issued by card networks like Visa or Mastercard, replacing the cardholder’s primary account number (PAN) at the network level. This is becoming increasingly popular for security purposes.

Throughout this article, we’ll focus on the first form of tokenization, payment tokenization. More specifically, what role do tokenization and vaulting play in payment orchestration?

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Key Benefits of Tokenization & Vaulting in Payment Orchestration

Payment orchestration platforms (POPs) leverage tokenization and vaulting to offer:

Enhanced Data Security 

Tokenizing and vaulting both help isolate sensitive payment data from potential breaches. Vaulting ensures that sensitive data is siloed and doesn’t enter the larger digital environment, limiting access points. And tokenization ensures none of that data is included in the patent message which is when PPI is most vulnerable. Combined, they create multiple layers of security to protect payment data at rest and in transit. This prevents payment fraud and safeguards against data breaches.

Fast Data Retrieval 

Security and performance are equally important. Payment processing systems should be as secure as possible without causing slowdowns for customers or payments teams. Using tokens keeps payment secure while allowing quick data retrieval, resulting in no added friction for the customer or engineering teams.

Simplifying Compliance

In the world of payments, PCI DSS is the gold standard for best security practices. Companies that fail to comply are at an increased risk of data breaches and are liable for stolen information and fraud. In the Ticketmaster case, customers filed a class action lawsuit against the company for allegedly lax security procedures.* 

Using a POP that includes tokenization and vaulting is a tried and true solution to prevent regulatory penalties and legal fees. By taking the proper measures to protect your customers' information, you've taken the proper steps to protect their information. Check out our article on security and compliance to learn about other methods and requirements.

Streamlining Scalability and Flexibility

This combo is especially effective because it streamlines payment management without interrupting transaction flow. Ideally, they’ll integrate smoothly into your current payments system or orchestration platform and have the capacity for a large amount of data, adapting easily as your business scales. 

Platform Independence

You can avoid the dreaded vendor lock-in when you own your solution and handle tokenization and vaulting internally. You can switch vendors as needed to suit your company’s evolving needs. If you prefer the hands-on approach, remaining in control of PII and security practices at all times, you may opt for this method. Plus, you gain the upper hand in negotiations to cut processing costs by leveraging multiple payment processing vendors.

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Real-World Applications of Vaulted Tokenization

The benefits might be obvious—but how do tokenization and vaulting look in practice? This techy multi-tool is essential for:

• E-commerce and Subscriptions: Recurring transactions and a speedy checkout experience drive revenue in e-commerce. Vaulted tokenization lets businesses store sensitive payment information securely, reducing the risk of fraud without requiring new payment details with each transaction.
• Buy Now, Pay Later: BNPL payments are especially helpful to customers during periods of inflation and economic hardship. BNPL providers use tokenization to protect PII and PCI from would-be thieves. However, this payment method is still plagued by fraud, thanks to methods that rely on human elements, such as phishing or manipulation.
• Digital Wallets: Digital wallets rely on vaulting and tokenization, plus encryption and 2FA, to allow users to store multiple payment cards on their smartphones or watches securely.

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Key Considerations for Implementing A Vaulted Tokenization Solution

If you’re convinced tokenization and vaulting are all they’re cracked up to be, the next question is how to implement them in payment orchestration. Consider the following issues:

System Compatibility and Integration

This is a critical pain point for enterprises whose payment processing systems are reliant on older legacy systems. You’re probably already aware that existing systems don’t always connect easily with newer platforms or technologies. In this situation, execs typically weigh the pros and cons of a larger system overhaul to replace their legacy system vs. working with an internal or third-party payments engineering team to build a custom solution.

Scalability and Flexibility

The best solutions can scale with your company. Ask yourself, can this solution handle a large volume of transactions without system impact? Can it easily adapt to new compliance laws? Are they flexible to shifting regional requirements?

Payment team leaders and VPs constantly consider payment orchestration platforms's long- and short-term benefits. The solution that is a good fit for right now may not be the best fit for your upcoming goals and projected growth, and vice versa.

Upfront Costs Vs. Long Term Investments

Would you rather invest in your payment processing strategy now or later? Custom solutions may result in higher initial costs but can also save money in the long run. For example, a well built POP with the added security of vaulted tokenization can minimize the cost of PCI DSS compliance and maintenance and prevent fraud and data breaches should the occasion arise.

A pre-built solution will likely cost less initially. However, if your needs change or your company scales beyond what an out-of-the-box solution can handle, you could spend more down the road to overhaul your system. The more complicated the processes and the larger the environment, the higher the cost to make any changes, let alone replace them or modernize the entire system.

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Future-Proofing Your Payment Security with Tokenization & Vaulting

A well-thought-out payments strategy is essential for long-term growth and stability. Payment orchestration allows you to maximize the benefits of tokenization and vaulting to secure customer data, repel cyberattacks, and comply with the latest security regulations. 

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Ready to integrate tokenization and vaulting into your payment security structure? We recommend exploring off-the-shelf orchestration solutions that offer built-in tokenization and vaulting functionality. If pre-built isn’t suitable for your company, and you need a custom payment solution, work with an experienced software development partner who prioritizes security and can ensure the final solution meets or exceeds your expectations.

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*As of today, a judgment has not been levied against Ticketmaster.