Reviewed by Aug 27, 2020| Updated on
Meaning of Luhn Algorithm
A Luhn algorithm is used to verify credit card numbers or other identification numbers, such as Aadhaar number. The Luhn algorithm, also known as the Luhn formula or module 10, tests the sum of the numbers in the card number and indicates whether the quantities are equal to what is predicted or if there is an error in the sequence of numbers. If the total modulus 10 is equal to zero after working through the algorithm, then the number is valid according to the Luhn rule.
Although the algorithm can be used to validate certain identification numbers, credit card authentication is most commonly associated with it. The algorithm is applicable to all major credit cards.
How the Luhn Algorithm Works?
A group of mathematicians developed the LUHN formula/algorithm in the 1960s. After its development, credit card companies initially implemented the algorithm for use. However, since the algorithm is open for the public, it can be accessed and used by anyone in theory.
The credit card validation process requires businesses and credit card companies to be able to quasi-instantly encrypt and decrypt confidential financial information about the card, issuer, and cardholder.
Use of the Luhn algorithm is a way to speed up the verification process. The Luhn algorithm is particularly useful as more transactions are performed online, where data breaches can be made easily.
To decide whether a credit card number is valid, the sum of all the digits is first determined to find the units digit, but not the test digit. The difference between the digit of the resulting sum at the units place and the number ten is the approximate test number. If the predicted check digit and the real check digit are similar, then the card is validated.