If asked, could you explain tokenization to your customers? Would you be able to tell them what the advantages would be if you offered a tokenization payment platform? For those who are not up-to-date on all of the new technology, tokenization could replace all the information that is contained in the magnetic stripe on the back of a credit or debit card. This would mean that stealing the information contained on the stripe would be virtually impossible.
For those with high risk merchant accounts, when a customer makes a purchase online, they input their card information into your checkout system and you probably ask for the CVV or other verification information. The sale clears authorization and you provide the service or ship the merchandise. Somewhere down the road, sometimes in 60 days or so, you receive a notification from the card issuer that says the customer claims they did not make the purchase as someone who was not authorized used their card. You receive a chargeback fee and one more black mark against your sales record. Does this sound familiar?
In the tokenization process, rather than the data going directly to your processor, it goes to the tokenization platform where it is issued a special key number or combination. Each token can only be used one time and then it is forever invalid. No one can steal a token. Rather than the customer’s private information being sent to your processor, the key to open the token is sent. There is no personal information in the virtual world. Therefore, it cannot be stolen. In addition, all fraudulent charges are found immediately and not 60 days from now. The chargebacks will never hit your account. You can remain under the 3% chargeback threshold.
Now you are asking yourself the big question: why isn’t everyone using this new encryption method? Let’s simplify the answer with another question: why can’t programs designed for Microsoft Windows run on a Mac? Because they are two different animals that read different languages. The same is happening with tokenization. No standards have been set up and each vendor is developing its own language. And – tokenization was developed because of the growth of mobile payments.
The Feds are getting into the middle of the action by setting up boards that are going to oversee tokenization. However, you have two separate groups that have their own agendas. On one hand you have the card issuers and processors who are interested in making revenue for all concerned. Then you have the card associations who want to ensure the safety of consumers’ data. There will have to be a meeting of the minds and a ‘bipartisan’ plan before tokenization is accepted by all merchants and processors.
No matter why you have a high risk merchant account, there is a processor that not only keeps abreast of all the latest high-tech platforms, but also specializes in high risk accounts. It does not matter if you have bad credit or you are involved in an industry that is looked upon as high risk such as e-cigarettes, adult dating and products, credit repair, online firearms and many others. There is never an application or setup fee. Rates for high risk merchants are among the lowest in the industry. And you do not have to have your own Visa and MasterCard license.
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