Is tokenization the currency of the future?

Technology changes credit or debit card number into ‘secret code'

By Allison McGinley - News Director

ORLANDO, Fla. - Heard of bitcoins?  Well, the electronic payment system is one step closer to becoming a legitimate currency.

It's now legal in California, and electronics website Newegg will allow its 25 million registered users to pay using bitcoins.

As retailer data breaches dominate headlines, many consumers are interested in the idea of paying with bitcoins or other electronic currency.

Experts say the high tech helps to keep credit and debit card numbers safe, calling "tokenization" the next big thing in payment security.

It all started with a text message that college student Chandler Nason got from her parents asking if she had spent hundreds of dollars on video games.

"And of course I was, like, ‘No, I didn't,'" says Nason, who was in fact, the victim of credit card fraud.

While she wasn't liable for the final tab, she says it was a headache to dispute the charges and replace the card.

"I was pretty frustrated when I found out that my information had been stolen," said Nason.

But experts say a new security system called "tokenization" can help.

It's designed to work when you pay with plastic in person, online or through a phone.

The credit or debit card processor substitutes account numbers with a "secret code" and sends that token to the retailer instead.

"A token is a piece of information, an algorithm if you will, numbers and symbols, that represent a card account number," said Jason Oxman, of Eletronic Transacation Associations.

This way, only banks and payment processors know real account information.

Retailers no longer have access to card account numbers, which means if they suffer a breach, personal information is safe.

So will users notice a difference when they check out?

Experts say no.  Tokenization is just working behind the scenes, and the secret code can't be seen.

Nason says whether she can see the secret code or not, she hopes it will mean a more secure future for her credit card.

"I feel like I should be able to use it online in the store, wherever, and not really have to worry about my information being taken," says Nason.

Eight million merchants in the United States accept credit and debit cards, but not all are using tokenization.  That's because banks, major credit card issuers, payment processors and merchants are working together to create a standardized system.

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