Data tokenization is the process of replacing a sensitive data element in a bank account number, for example, with a nonsensitive substitute called a “token.” The token is a randomized data string that does not mean anything. It only serves as a unique identifier that retains all the pertinent information about the data without compromising its security.

Think of it this way. To keep your bank account number (i.e., 3890-2456-1758) secret, tokenization can replace the numbers with predetermined characters that will not affect how the bank system will read it. So, instead of seeing 3890-2456-1758 during your entire transaction, you and everyone else will see something like cBgO-zhSG-!LSB instead. Each number has been substituted with a unique identifier to keep the account number’s integrity while keeping it confidential.

Read More about Data Tokenization

Data tokenization is a simple way to protect information. Find out more about it below.

How Does Data Tokenization Work?

Tokenization follows the six-step process below.

  1. The sensitive data that requires tokenization like a credit card number must first be identified.
  2. A tokenization system that comprises secure databases, encryption keys, and algorithms to create and manage tokens is used to manage the process.
  3. The system links sensitive data with the appropriate tokens using a mapping table or database that preserves the relationship between the original and tokenized data.
  4. The system replaces the sensitive data with tokens.
  5. A tokenization database safely stores the tokenized data with any related metadata or background information in a different and very secure location. Even if the tokenized data is compromised, it cannot be used to retrieve the original data because the sensitive data is not stored in its original form.
  6. Only authorized systems or apps can process the tokenized data using the mapping table or database to obtain the original data. Note that the table is never sent to the recipient.

How Does Data Tokenization Differ from Data Encryption?

Data encryption transforms data into an illegible format. It obfuscates data to encrypt it and requires decryption keys to restore the original messages once received by the intended recipient.

Data encryption is designed to be reversed once the original data reaches its intended destination. Anyone tech-savvy enough can steal the decryption keys or break the encryption algorithm to read the encrypted data.

In contrast, tokenization does not depend on keys or encryption algorithms. The tokens act like proxies and do not have real values. Token mappings are stored in a secure location and are never transferred over IT networks unlike decryption keys.

Data Tokenization versus Data Encryption

What Are the Benefits of Data Tokenization ?

Tokenization provides several advantages. Take a look at some of them below.

Assure Your Customers

Tokenization provides an additional layer of security for e-commerce websites, increasing consumer trust.

Protect against Breaches

Tokenization lets companies do business without needing to capture sensitive information in their input terminals. The data is instead kept in internal databases and not transmitted through their information systems. This ability safeguards against security breaches.

Keep Patient Data Secure

Healthcare providers can use tokenization solutions to comply with the mandates of the 

Health Insurance Portability and Accountability Act of 1996 (HIPAA), specifically keeping patient information secret.

Secure Credit Card Payments

Tokenization solutions protect cardholder data, such as those stored on magnetic stripes. As such, companies can comply with industry standards more easily by protecting client information.

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All businesses collect and store personally identifiable information (PII). And they can all benefit from tokenization.

Key Takeaways

  • Data tokenization is the process of replacing a sensitive data element like a bank account number with a nonsensitive substitute or token.
  • Tokenization and encryption primarily differ in that tokenization does not require the recipient to see what the sensitive data is upon receipt while encryption does.
  • It can assure clients of data privacy and security, helps companies comply with regulations, and safeguards against compromise.

Sources

  • https://en.wikipedia.org/wiki/Tokenization_(data_security)
  • https://www.akamai.com/glossary/what-is-tokenization
  • https://www.spiceworks.com/it-security/data-security/articles/what-is-tokenization/
  • https://www.cio.com/article/403692/data-tokenization-a-new-way-of-data-masking.html