Overview: Tokenization

Quick Definition

Tokenization is a data protection technique that replaces sensitive data with non-sensitive placeholder values called tokens. The original sensitive data is stored securely in a separate system called a token vault, while the tokens can be used safely in business processes without exposing the actual sensitive information.

Unlike encryption, tokenization does not use mathematical algorithms to transform data. Instead, it creates a random mapping between the original data and the token. This means tokens have no mathematical relationship to the original data and cannot be reversed without access to the tokenization system.

Tokenization is commonly used to protect credit card numbers, Social Security numbers, and other personally identifiable information (PII). For example, when a customer makes an online purchase, their credit card number might be tokenized immediately, allowing the business to process orders and store transaction records using only the tokens while keeping the actual card numbers in a highly secure, separate environment.

This approach significantly reduces the scope of compliance requirements like PCI DSS, since systems handling tokens instead of actual sensitive data face fewer regulatory obligations. If a breach occurs in systems using tokens, the stolen data is essentially meaningless without access to the tokenization vault.