What is Tokenization?

 May 4, 2021

By  Skip Gilleland

In 2001 TrustCommerce introduced digital tokenization to protect sensitive credit card information for a client, Classmates.com. Prior to this, merchants stored the private data in their own servers that anyone with system access can view this information.

So, what is tokenization?

Tokenization is the method of converting sensitive data into nonsensitive data or "tokens" that you can use in a database or internal system without fully exposing it.

Learn more about tokenization, what a token is, how data tokenization works, and more.

What is Tokenization

Tokenization is the process of replacing sensitive data, such as a bank account number, with a non-sensitive replacement, called a token. This token is a randomized data string with no value or significance, a one-of-a-kind identifier that saves all relevant data without jeopardizing the data's protection.

In a tokenization system, the original data is linked to a token. And there is no way to decode the token and expose the original data. On the other hand, applying an encryption system allows the decryption of data using a hidden key.

What is a Token

A token is a piece of data that acts as a stand-in for a more important piece of information. Tokens have absolutely no value. They are helpful because they represent something valuable.

Think of a poker chip. Casinos use this chip to represent money as placeholders. You cannot use these chips outside, but you will need to exchange them after the game.

Tokenization works by replacing valuable data in the environment with tokens. Credit card records, medical information, Social Security numbers, most businesses have these confidential data on their servers.

Tokenization eliminates this data from the environment and substitutes it with tokens unique to each piece of knowledge.

Do you want to know more about tokenization and how it works? Check the second part of this article.

Skip Gilleland

Skip Gilleland is the VP of Marketing at tranzpay.io. and is a CERTIFIED Customer Value Optimization Specialist, Content Marketing Specialist, Email Marketing Specialist, and a Certified Customer Acquisition Specialist

Skip Gilleland

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