A Comparison: Tokenization & Encryption

Tokenization and encryption are common solutions when it comes to protecting sensitive data. Many companies around the world are using these technologies in combination to store credit card data (PCI/CHD), personally identifiable information (PII), protected health information (PHI), and automated clearing, protecting house (ACH) data and more.

Both tokenization and encryption technologies have long been essential tools for protecting sensitive data. Both serve to protect data at rest and in transit within the enterprise, but there are distinct differences in the level of security they provide and the flexibility of their implementation. In a direct comparison, tokenization is a superior security technique.

Encryption protects sensitive values ​​such as personal data, cardholder data (CHD), personally identifiable information (PII), and protected health information (PHI), ideally from authorized entities in their possession. Replace it with a mathematically derived placeholder that can only be read by the same encryption key that was used to create the value. Payment Account Numbers (PANs) are encrypted when transmitted between your browser and the online store. This level of security is now ubiquitous in financial transactions over the internet and helps make encrypted PANs and other information unreadable to intermediaries.

Once the PAN reaches the online store’s web server, it is decrypted and used by retail software to charge the customer’s account and trigger a series of actions by merchants, payment processors, and card issuers. Retailers often store card data to make it easier for customers to make purchases and make recurring payments.

Encryption strength is based on the algorithm used to protect the data. More complex algorithms produce stronger encryption that is harder to crack. However, the encryption will eventually become decipherable. It’s a question of how powerful the algorithm is, how powerful the computers of the people trying to crack it. Encryption makes the actual information hidden in the encrypted data harder to find, but not impossible to reveal.

If a retailer’s IT system were attacked by hackers, her database of customers’ PANs, even encrypted, could be stolen and sold for fraudulent purposes. This is the main weakness of encryption. If a compromise exposes the key, the encrypted data can be restored to its original confidential form. Encrypting data makes it temporarily secure in transit, but leaves it vulnerable to theft and decryption once stored in business systems.

Tokenization Knowledge & Benefits

Tokenization may sound complicated, but the beauty is in its simplicity.

Tokenization replaces personal data, such as payment account numbers, with a series of random numbers called tokens. Instead of full personal account data passing through multiple systems with varying levels of security, personal data is tokenized when you swipe, dip, or enter credit card information online. The actual data referenced by the token is stored in a highly secure token vault. Tokens themselves are worthless to scammers. More than just a security technology, tokenization helps create a seamless payment experience and happy customers. Tokenization reduces the risk of data breaches, increases customer trust, minimizes paperwork, and powers the technology behind popular payment services such as mobile wallets. Best of all, today’s businesses enjoy all these benefits.

1. Tokenization reduces the threat of information breaches.

Criminals target companies that accept credit and debit cards because payment information contains a wealth of information. Hackers target insecure systems containing this information and sell the stolen data or use it to make unauthorized purchases.

Tokenization helps protect your business from the financial consequences of data theft. Even in the event of a breach, your valuable personal information will not be stolen. Tokenization cannot protect an organization from a data breach, but it can mitigate the economic impact of a potential breach.

2. Tokenization helps build trust with customers

Consumers want security wherever they shop. At a time when fraud threatens the entire economy, building customer trust and loyalty starts with keeping payments and other personal information safe. In a 2018 CA Technologies/Frost & Sullivan survey, 59% of consumers said the data breach had adversely affected their trust in the affected companies. Aside from avoiding worst-case scenarios of data breaches, the use of advanced security such as tokenization inspires customer trust. Our strong commitment to the security of customer data is highly valued by our consumers.

3. Tokenization means less bureaucracy in business

Businesses that accept credit and debit cards must comply with the Payment Card Industry Data Security Standard (PCI DSS). Tokenization makes it much easier to achieve and maintain compliance with industry regulations.

4. Tokenization drives payment innovations

PCI DSS seeks to reduce retention of sensitive data and securely regulate its storage and deletion. Tokenization fulfils this important requirement by keeping sensitive cardholder information out of the system. It is not a silver bullet for compliance. However, working with a PCI-compliant provider offers a smarter approach to payment security. Major payment technology companies offer tokenization as part of their payment processing services. So you can focus on growing your business while your payment partners cut through the hassles and keep your business compliant.

Tokenization Drives Payments Innovation

The technology behind tokenization is integral to many ways of buying and selling today. From secure in-store acceptance to on-the-go payments, from traditional e-commerce to the new generation of in-app payments, tokenization makes device payments easier and safer than ever.

The growing popularity of payments for businesses using their customers’ mobile devices is characterized by tokenization. When a consumer pays with her mobile wallet such as Apple Pay or Google Pay, her personal credit card information is stored as a token on her mobile phone. Additional security comes from the smartphone itself with an additional layer of biometric security and other advanced means of authentication. Tokenization is the cornerstone of e-commerce, making payments more secure and improving the user experience whether online, mobile or in apps.

Understanding Encryption & Benefits

Data encryption can effectively add a layer of protection to large amount of data without preventing the data from being transmitted or accessed by the recipient. In fact, for many common data protection use cases, data encryption offers the best combination of convenience, practicality, and security. Consider the encryption below.

Unstructured data, big data:

When companies transmit large numbers of data, such as images and video material, data encryption can provide effective protection without incurring large costs. Similarly, if your data lacks the structure required for token mapping (ID numbers, credit card details, etc.), encryption is a viable alternative.

Lower compliance requirements:

Some data requires protection like Fort Knox, and regulations like PCI compliance and HIPAA require equivalent protection. Other datasets require adequate protection coupled with reducing the motivation for data theft. In such cases, encryption is the most cost-effective means of protection.

Encryption Consulting helps organizations identify the greatest risks to their organization by conducting a data encryption assessment. It also helps you understand skill maturity and gaps within your organization. Based on this assessment, a data encryption strategy is developed along with a roadmap that defines the components and functions of the data protection program and implements an end-to-end encryption plan.

Difference between Tokenization & Encryption

Encryption alone cannot fully protect your payments and personal information. Encryption and tokenization must work together to protect data in transit and at rest, both of which are important security measures to protect sensitive data from theft at various stages of cash flow. TokenEx cloud data protection platform combines encryption and tokenization to provide a powerful multi-layered security architecture that significantly reduces the risk of data theft and the cost of PCI compliance, effectively protecting data while saving money.

Both tokenization and encryption are methods of protecting sensitive information and data frequently transmitted over the Internet. Both are effective obfuscation solutions for data security, but there are significant differences between them. Tokenization is the technique of replacing sensitive data with random alternative values ​​called tokens that refer to the original data through a tokenization system. Encryption, on the other hand, is a method of transforming plaintext into ciphertext using an encryption algorithm and a key.


The tokenization system creates two different databases.

The actual data is in one, and the tokens connected to each piece of that data are in the other. Create a plaintext token value at random, then store the mapping in the database. It shares many similarities with cryptography, but tokenization makes the process irreversible. On the other hand, encryption encrypts data using a process that can be undone with the right key. The plaintext is converted into ciphertext by the sender and sent to the recipient. The ciphertext is converted back to plaintext by the recipient.


Systems that use tokenization obfuscate sensitive data or information using tokens. Use the token value instead of the actual data to access the original data. The data is presented to the user or program after the token server authenticates the user or program, retrieves the appropriate token from the token database, and pulls the actual data from the actual database. In contrast, there are primarily two methods for widely used cryptography encryption that is symmetric and asymmetric. Asymmetric encryption uses two keys, whereas symmetric encryption uses just one key for encryption and decryption.


In order to increase security, tokenization schemes are frequently used in credit card processing. Tokenization is most frequently used to protect social security numbers, bank account numbers, phone numbers, email addresses, and payment card information. On the other hand, both structured and unstructured fields use encryption. It is frequently used to safeguard the security of online electronic transactions and to safeguard the communications of people and organizations from cybercriminals. Additionally, it safeguards data on smartphones and other portable electronics.

The main difference and advantage of using tokenization over encryption is that the tokenized data cannot be converted back to its original form. Unlike encryption, tokenization uses a key and does not modify the original data. Instead, it permanently removes the data from the organization’s internal systems and replaces it with randomly generated, non-sensitive placeholders (tokens). These placeholders can be stored within an organization’s internal systems for business purposes, while sensitive values are safely stored outside the environment. So if the tokenized environment is compromised, no sensitive data or compromised keys/credentials will be exposed, only non-sensitive tokens will be exposed. No sensitive data is stored, so it cannot be stolen.

Due to its risk mitigation capabilities, tokenization is widely used to protect cardholder information and other PCI data. With Tokenization as a PCI compliance solution integrated into Cash Flow, card data (usually the primary account number (PAN) of a credit card) is instantly sent to a secure cloud platform for tokenization. From there it is stored and exchanged for mathematically unrelated tokens. Tokens are sent back to the merchant for further processing and storage. The actual PAN is sent by the token provider to the payment processor to complete the transaction. Securing cash flow with PCI tokenization has four distinct advantages over encryption alone. PANs are never accepted by merchants unprotected. No version of PAN is stored or transmitted by the merchant, only the token representing it is stored. Tokens stolen during a breach are completely useless to hackers as they cannot be restored to their original PAN. No key management required. Sensitive data itself is stored securely in the cloud, out of the reach of hackers.

Encrypted data can be reverted and is still considered sensitive data by the PCI Security Standards Council and other relevant compliance agencies. Therefore, using encryption alone to protect PANs stored in business systems does not reduce the scope of compliance. Simply removing payment data entirely and replacing it with tokens actually reduces scope, cost, and risk.

TokenEx cloud data protection platform is designed to tokenize and securely store all kinds of sensitive data including PCI such as cardholder data and PAN. TokenEx has flexible methods for collecting and removing data from the furthest reaches of your organization. By removing payment data from an organization’s business systems, most, if not all, IT systems are subject to the lowest level of PCI audits, significantly reducing the scope and cost of compliance.

Bringing It To A Close

Making a choice between the two aforementioned principles is not always easy. Your organization’s unique demands will determine whether tokenization or encryption should be used. Tokenization is an option if you want to maintain compliance and reduce your PCI DSS obligations. On the other hand, encryption is ideal if you need scalability and you need to encrypt enormous amounts of data. This is due to the fact that an encryption key will be needed.