What is Credit Card Encryption?

Credit card encryption comprises security measures to significantly reduce the risk of stealing private and valuable card information. This includes securing the card itself, the terminal where it is scanned, and the transmission of information between the terminal and the system’s backend. This is achieved through either encryption or tokenization. Given that over 46% of Americans have experienced fraudulent activity in the past five years, the importance of protecting our accounts has grown substantially.

Encryption vs Tokenization

Understanding the distinctions between these two protection methods can help determine the best choice for your business. Tokenization involves replacing a card’s information within a company’s internal network with a generated marker, or “token.” For instance, a credit card number like 1234 5678 1234 5678 could be transformed into J7U12TB0UQ70J76, with different tokens assigned to different merchants. These tokens are useless to thieves as they cannot reverse engineer them into the original card number.

Encryption, however, masks the buyer’s data using an algorithm that scrambles the card information, making it unreadable without the proper key. This end-to-end method ensures the data remains secure from the point of purchase (in-store or online) until it reaches its intended destination. The data stays unreadable at rest and in motion until the system’s key decrypts it, making it extremely difficult for hackers to steal the information. Both methods are excellent for combating credit card theft.

Why Use Encryption?

Previously, systems relied on the magnetic stripe on the back of a card or the CVV number for transactions, but during the 2014 fraud crisis, these systems were heavily compromised by malware. Stolen information can be encoded onto a new stripe and used for fraudulent purchases.

Today, encrypted credit cards (smart cards) come with an electronic chip that is much harder to replicate. When used with an encrypted card reader, such as an EMV, the likelihood of criminals duplicating the information is nearly eliminated. These modern systems utilize important encryption keys.

There are two types of keys: private and public. Public keys encrypt data, while companies use private keys to decrypt it. The system’s security is enhanced by regularly rotating these keys, making private keys difficult for fraudsters to obtain while limiting the data stored on any single key. This method has proven effective in the U.S. and Europe and is one of the best ways to ensure your customer’s information remains secure.

Encryption and Your Business

Businesses worldwide have adopted EMV readers to secure transactions and better comply with PCI encryption requirements. Using these services ensures your business is not held liable under the Fraud Liability Shift if information is stolen. Your customers will feel more secure knowing they are not at risk, and you can have peace of mind that these systems protect your business’s reputation and legal standing.