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Tokenization is not a new concept, as people frequently use it in the blockchain. However, the concept of the token is older than blockchain. Many people consider the word token as a security. For instance, a security token is a traditional device to access a system. It transfers the identification files into the computer, validating the access. Therefore, this article will talk to you about tokenization and how it protects sensitive data in a non-protective system.

What is Tokenization?

Tokenization is a technique to convert sensitive data into non-sensitive by including unique identification symbols. Therefore, it helps in retaining the data without breaching security. In other words, the process of tokenization replaces the original data with discrete values in order to protect highly important data. Tokens are different than encrypted data. These data are irreversible and undecipherable. Unlike encryption, tokenization does not include any mathematical connection between the original data and the tokens. Therefore, you cannot return tokens to the original form.

What is a Token?

A token is a data that represents another valuable piece of data. These data have no value other than the fact that they correspond with something bigger. That is the only reason for their importance. The concept of the token is similar to poker chips. Players do not use direct cash when they are playing a game. Instead, they replace it with chips. Even though these chips have no value on their own, players will substitute them for real money. Once the game ends, the player can exchange it with actual cash.

The process of tokenization simply substitutes the valuable data in an environment to add security. Every business in any industry includes some sensitive data of their customers, clients, and purchasers. The data can be medical information, criminal records, credit card details, Social Security number, or anything else. Therefore, to lose that important data, companies use the tokenization technique. They take the data away from the environment by placing tokens. Each token contains or represents unique information, which makes each of them valuable.

Reasons to Use Tokenization

There are numerous benefits to making use of tokenization. One of these benefits includes encouraging businesses to perform their tasks in a protective environment. For instance, businesses can easily and protectively accept and send payments without compromising their security. This increases the confidence of the audience to carry out transactions with your business. 

Tokenization does not protect the business but brings flexibility in the payment process, providing optimal experiences to the customers. Furthermore, it keeps the transactions smooth. Satisfying your customers with high-precision security will contribute to business growth. 

Through tokenization, you can reduce the risk of data breaches and build trust for your business in the industry. Knowing that you follow the trends of technology, customers will recognize you as the lead in the market. Below, we will discuss the benefits of tokenization in detail:

  • Decreasing Risk from Data Breach

Businesses that deal in credit and debit cards contain a wide range of information. The customers provide those details because they trust the security of these businesses. However, many of them do not have a security system to defend against cybercriminals. Therefore, these criminals can easily steal valuable data and use it for fraudulent purposes.

Tokenization isn’t a technique that prevents data breaches, but it can secure sensitive information from threats. For instance, when a cybercriminal tries to steal valuable data, they will not find the actual data but the tokens. Their theft will be unsuccessful in avoiding any negative impact on your business. Therefore, tokenization will reduce the financial fallout after any data breach. 

  • Building Trust between Customers

When consumers share their personal information with your business, they believe that you have a secured system. Therefore, they do not hesitate when using their credit and debit cards or other financial details. The risk of fraudulent activities is drastically increasing due to highly competitive markets. 

Therefore, it is essential to protect potential customers by gaining their trust. Subsequently, you can convert a potential customer into a loyal one by providing them with adequate security.

One of the best ways to expand customer’s trust is through adopting tokenization for data protection. Customers don’t want their financial information in the wrong hands. Therefore, they want strong commitment from your business.

  • Reducing Red Tape

To accept credit and debit cards from customers, you should seek approval from PCI DSS or Payment Card Industry Data Security Standard. With the implementation of tokenization, you can easily achieve these regulations. Implementing tokenization complies with the set #3 requirement, which indicates the protection of cardholders’ data. 

According to the requirement, you must safely store and delete sensitive information from customers. However, tokenization will never transfer the cardholders’ data into your system. Instead, it places a token for each set of data. Consequently, it contributes to the growth of your business by reducing the red tape. Hence, your business remains in compliance.

  • Driving Payment Innovation

Tokenization is already a popular technology that many businesses, eCommerce websites, and POS acceptance systems utilize. This technique makes the payment system convenient for customers and safe to use for businesses. Even for in-store payment applications and mobile devices, developers include the process of tokenization. For instance, while purchasing from your mobile devices through Google Pay or Apple Pay, the system stores your phone as a token. Smartphone manufacturers also include additional security layers on their biometric and other authentication systems.


Tokenization generates unique tokens in replacement of original data. It allows you to secure the database from a data breach. You can utilize this technique to secure valuable data, such as Social Security numbers and payment card details. You can maintain the format of the data without impacting your current security. Because tokenization replaces the data with tokens, the original data never leaves the organization’s database. Therefore, at the time of data break, a cybercriminal will find tokens instead of the data they want to steal.


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