Tokenization

Tokenization is a security measure applied to electronic payments to protect sensitive information, such as credit card numbers, by replacing it with a unique identifier called a token. This process involves converting the original payment data into a non-sensitive and randomly generated token while preserving its format and length. The most popular use of tokenization is for a customer’s Primary Account Number (PAN).

Tokenization enhances the security of payment transactions by ensuring that the actual card details are not stored or transmitted during transactions. In the event of a data breach, tokens provide an added layer of protection as they are meaningless without the corresponding encryption key held by the tokenization system. All tokenization systems should be secured and validated, applying best practices to audit, storage, data protection, authentication, and authorization, such as the ones falling under the PCI DSS compliance scope.

Tokenization is widely used in various payment scenarios, including online and mobile payments, creating a secure environment for transactions and reducing the risk of fraud associated with the exposure of sensitive payment information.

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