What is Tokenization?

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Tokenization is the process of exchanging sensitive data for nonsensitive data called “tokens” that can be used in a database or internal system without bringing it into scope.  

Although the tokens are unrelated values, they retain certain elements of the original data commonly length or format so they can be used for uninterrupted business operations. The original sensitive data is then safely stored outside of the organization’s internal systems.  

Unlike encrypted data, tokenized data is undecipherable and irreversible. This distinction is particularly important: Because there is no mathematical relationship between the token and its original number, tokens cannot be returned to their original form without the presence of additional, separately stored data. As a result, a breach of a tokenized environment will not compromise the original sensitive data.  

What is a Token?

As described previously, a token is a piece of data that stands in for another, more valuable piece of information. Tokens have virtually no value on their own they are only useful because they represent something valuable, such as a credit card primary account number (PAN) or Social Security number (SSN).   

A good analogy is a poker chip. Instead of filling a table with cash (which can be easily lost or stolen), players use chips as placeholders. However, the chips can’t be used as money, even if they’re stolen. They must first be exchanged for their representative value.  

Tokenization works by removing the valuable data from your environment and replacing it with these tokens. Most businesses hold at least some sensitive data within their systems, whether it be credit card data, medical information, Social Security numbers, or anything else that requires security and protection. Using tokenization, organizations can continue to use this data for business purposes without incurring the risk or compliance scope of storing sensitive data internally.

What is the Purpose of Tokenization?

The purpose of tokenization is to protect sensitive data while preserving its business utility. This differs from encryption, where sensitive data is modified and stored with methods that do not allow its continued use for business purposes. If tokenization is like a poker chip, encryption is like a lockbox.  

Additionally, encrypted numbers can be decrypted with the appropriate key. Tokens, however, cannot be reversed, because there is no significant mathematical relationship between the token and its original number.  

What is Detokenization?

Detokenization is the reverse process, exchanging the token for the original data. Detokenization can be done only by the original tokenization system. There is no other way to obtain the original number from just the token.  

Tokens can be single-use (low-value) for operations such as one-time debit card transactions that don’t need to be retained, or they can be persistent (high-value) for items such as a repeat customer’s credit card number that needs to be stored in a database for recurring transactions.  

As described previously, a token is a piece of data that stands in for another, more valuable piece of information. Tokens have virtually no value on their own. They are only useful because they represent something valuable, such as a credit card primary account number (PAN) or Social Security number (SSN).

What is the Encryption Process?

Encryption is a process during which sensitive data is mathematically changed, but its original pattern is still present within the new code. This means encrypted numbers can be decrypted with the appropriate key, through either brute computing force or a hacked/stolen key.  

What is the Goal of Tokenization?

The goal of an effective tokenization platform is to remove any original sensitive payment or personal data from your business systems, replace each data set with an indecipherable token, and store the original data in a secure cloud environment, separate from your business systems.  

For example, tokenization in banking protects cardholder data. When you process a payment using the token stored in your systems, only the original credit card tokenization system can swap the token with the corresponding primary account number (PAN) and send it to the payment processor for authorization. Your systems never record, transmit, or store the PAN only the token.  

Although no technology can guarantee the prevention of a data breach, a properly built and implemented cloud tokenization platform can prevent the exposure of sensitive data, stopping attackers from capturing any type of usable information financial or personal.  

Usable information is the key here. Tokenization is not a security system that stops hackers from penetrating your networks and information systems. There are many other security technologies designed for that purpose. Rather, it represents a data-centric approach to security that adheres to “Zero Trust” principles.  

However, no defense has proven to be impenetrable. Whether through human error, malware, phishing emails, or brute force, cybercriminals have many ways to prey on vulnerable organizations. In many cases, it’s a matter of when not if an attack will succeed. The advantage of cloud tokenization is there is no information available to steal when the inevitable breach happens. Because of this, it virtually eliminates the risk of data theft. 

Does Tokenization Mask Data?

Data masking desensitizes sensitive data by changing pieces of the data until it cannot be traced back to the original data. Instead of erasing part of the data, or replacing it with blank values, it replaces sensitive sections with data masked to match the characteristics of the original data.   

Tokenization is a form of masking data that not only creates a masked version of the data but also stores the original data in a secure location. This creates masked data tokens that cannot be traced back to the original data, while still providing access to the original data as needed.

Is Tokenized Data Pseudonymous Data?

Pseudonymized data is data that cannot be connected to a specific individual. Data pseudonymization is especially important for companies who work with protected individual data and need to be compliant with GDPR and CCPA. In order for data to be pseudonymized, the personal reference in the original data must both be replaced by a pseudonym and decoupled from the assignment of that pseudonym. If the personally identifiable information (PII) has been replaced in a way that is untraceable, then the data has been pseudonymized.  

Tokenization is a well-known and accepted pseudonymization tool. Tokenization is specifically an advanced form of pseudonymization that is used to protect the individuals’ identity while maintaining the original data’s functionality. Cloud-based tokenization providers enable organizations to remove the identifying data completely from their environments, decreasing both the scope and the cost of compliance.

Is Tokenization Right for My Data?

Tokenization works to not only increase security for sensitive data but also cut down on compliance scope and associated costs. The flexibility of tokenization allows companies to create customized solutions that help them balance their data utility needs with data security requirements.  

If you’re curious about tokenization for your organization, reach out to a TokenEx representative today. We’d love to have a conversation about your unique data use case and discuss whether tokenization could support your data security goals.   

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