What is Data Tokenization?
Tokenization is one of the most popular security technologies being used in the modern-day to protect data. It is primarily used to protect credit card data from theft and to keep sensitive information safe from hackers.
However, most business owners are unsure about how tokenization works and what significant advantages they can get from using this payment method. To put it simply, when a customer swipes their debit or credit cards at the checkout, their account numbers are stored directly in the merchant’s payment system. Instead, the information is replaced with randomly generated token IDs.
Once the transaction is completed, the merchant then sends the randomly generated ID in place of the personal account number. This way, the information is never stored in the retailer’s environment. Therefore, it’s easy to see that the most significant advantage of data tokenization is improved security.
Tokenization vs. Encryption
While both encryption and tokenization are a form of cryptography, they aren’t the same thing. Both encryption and tokenization scramble the original data, but the difference is how you “unscramble” the data.
Encryption uses a key that can be used to decrypt the data, and anyone who has the key can decrypt the data. However, tokenization does not generate a key but instead stores the original data in a secure area outside of the unique environment. A token is needed to access the original data. Both encryption and tokenization have their advantages.
Encryption is generally used in cases where the data is unstructured and not stored in multiple systems. Tokenization is generally used in situations where the information is structured, such as credit card numbers and social security cards.
Here are five more that you should know about.
Internal Protection and Safety
Data tokenization isn’t only designed to keep anonymous criminals at bay. In fact, it is also designed to stop sensitive information from people who are connected with your company or your organization.
That can include any stakeholder, such as your employees, your suppliers, or your vendors. You must understand that no one can read these randomly generated IDs cannot be read by anyone, but the company processing the payments.
Reduced Scope of PCI
Another significant benefit that you get for using tokenization from reputable companies like OpenText is that it makes it considerably easier for merchants to get PCI compliant.
Retailers don’t have to store any data, and that means they don’t have to worry about risks and they don’t even need to invest such a large sum of money or as many resources on protecting sensitive customer information. On top of that, tokenization also simplifies PCI audits and reduces their costs significantly.
Protection From Online Elements
Chip-enabled credit cards have now gone mainstream throughout the globe, and for a transaction to go through, the chip needs to be present, and the customer needs to add their PIN or a unique signature.
However, when making transactions online, this is not feasible because the chip won’t be physically present. If you opt for tokenization, it provides unprecedented levels of protection, and it doesn’t matter if you conduct business online or at a physical store.
Works Seamlessly with Other Technologies
Tokenization isn’t only restricted to plastic credit cards, but it can also be used with NFC payments, gift cards, Apple Pay, and numerous other modes of payment transfer. The data of your customers will remain safe and secure regardless of the method that they use to send or receive money. Tokenization is incredibly smooth and compatible with other technologies.
Useful with Other Types of Information
You don’t need to think that tokenization is only helpful with financial information. It can be used to secure patient records, files of employees in a company, email addresses, passwords, or username combinations. Their versatile range of applications makes them an incredibly popular choice for use in various industries.
Reduce Risk of Data Breach
Worried that your company’s data might be stolen or if a serious breach could occur? With tokenization, you can at least make sure that a significant margin reduces the chances of a data breach. More importantly, this will translate into a considerable positive impact on your company’s costs, as it reduces the risk of penalization.
If your company isn’t using any safety or security technology, the penalty levied to your company could be incredibly high, so it’s recommended that you take steps right away to introduce tokenization.
Data Privacy Laws
Many industries are required to follow strict government data privacy regulations. Industries such as healthcare, tech, and other sectors that store sensitive user data need to ensure their data privacy policies comply with government regulations.
While encryption is historically widely used for data protection, tokenization has seen a rise in popularity and is seen as a more secure way to protect data and guard sensitive data. Through proper implantation of tokenization, individuals and businesses can ensure they cost-effectively comply with privacy laws.
Reduce Liability for breaches
As mentioned earlier, tokenization is seen as superior to encryption for securing sensitive data due to the inability to unscramble the encrypted data. Encryption still poses a security risk as anyone with the decryption key can access the original data. However, this is not the case for tokenization.
If a hacker gains access to tokenized data, they cannot decrypt it due to the randomness of the decryption. Using tokenization to secure your data adds a layer of protection that not only reduces compliance cost but will protect your business from liability in case of breach attacks and lower the chances of attacks overall.