Understanding Tokenization

Tokenization is a security technology that protects sensitive data by replacing it with non-sensitive placeholders called "tokens". This approach allows businesses to handle sensitive information securely while maintaining functionality.

How Tokenization Works

When a customer enters their payment credentials during checkout, instead of storing that sensitive data, your systems:

1. Send the payment data to a tokenization provider
2. Receive back a token that represents those credentials
3. Store this token within the customer's account for future transactions

The token may maintain the format of the original data but has no mathematical relationship to it. This means tokens cannot be reversed back to the original card numbers.

Benefits of Tokenization

Improved Security

• Removes sensitive data from your systems
• Reduces impact of potential breaches
• Cannot be reversed to original data
• Faster checkout with minimal friction

Better Customer Experience

• Streamlines recurring payments
• Faster checkout process
• Supports subscription models

Simplified Compliance

• Reduces/removes PCI DSS scope
• Minimizes compliance costs
• Simplifies security audits

Tokenization vs Encryption

Unlike encryption which uses mathematical algorithms that can be reversed with the right key(s), tokenization completely removes sensitive data from your systems. The tokens have no mathematical relationship to the original data and can only be exchanged for the real data by the tokenization provider.

While encrypted data remains vulnerable if encryption keys are compromised, tokenized data provides no value to attackers even in the event of a breach.