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Data Tokenization: Bullet-Proof Security + Watertight Compliance

In our digital age, data is a key asset for any company – and data security is a must. But data leaks and breaches are on the rise, with 67% of recently surveyed organizations reporting incidents of this kind. To combat the growing threat, many organizations are deploying an innovative approach known as data tokenization. By replacing sensitive data with random tokens, this technology has a host of benefits when it comes to security and compliance. Read on to find out more about data tokenization, how it works, and the advantages if offers.


What Is Data Tokenization and How Does it Work?


Tokenization involves swapping out sensitive data for unique non-sensitive symbols (tokens) while preserving the format of the original data. In addition to masking the data, the random tokens act as identifiers, referring to sensitive information such as payment or personal details. By themselves, however, they have no intrinsic or exploitable value or meaning.


To determine the data that these tokens refer to, you must decode them inside the tokenization system. As a result, tokenized data is not only considerably less vulnerable to data breaches; it also enables organizations to remain compliant with the increasingly challenging array of national and international data-compliance laws and regulations.


Broadly speaking, tokenization achieved in one of two ways: either by using a high-security encrypted database to store the sensitive values that have been removed from the main database; or by using a highly secure algorithm and process for creating tokens and mapping these back to the original values.


Vault-Based versus Vault-Less Tokenization


Accordingly, there are two main types of data tokenization: vault-based and vault-less. The first, which is the more commonly used, stores sensitive data in a secure database known as a vault. The vault also serves as a dictionary of sensitive data values, mapping them to the corresponding tokens. Consequently, users must have authorized access to the vault to decode the tokens and reveal the values in the sensitive data.


While vault-based tokenization delivers impressive levels of security, it has some disadvantages. Tokenizing large files or data volumes is very likely to create latency issues, undermining overall process efficiency. And this makes it difficult to scale the vault-based approach to handle growing databases without impacting performance

As the name suggests, vault-less tokenization eliminates the need for a high-security database. Instead, it deploys a highly secure cryptographic device to generate tokens using only an algorithm. These tokens can then be reversed – or detokenized – to reveal the original values, without having to store them in a dedicated vault.


Tokenization or Encryption?

The highly effective data-masking capabilities of tokenization are certainly a powerful argument in favor of the tech. But there are some situations in which more conventional encryption may be the preferred option. For example, if you need a system that can be scaled to very large data volumes, it makes sense to deploy encryption solutions that need only a very small amount of key-management effort.


Another scenario in which encryption may be more appropriate is when you share sensitive data with third parties. If you have to make data of this kind available in its original format and with its original values, then encryption may be your best bet. Otherwise, you’ll need to grant external parties access to your token vault to decode the shared information – opening the door to potentially serious security breaches.


Four Good Reasons to Use Data Tokenization


Where encryption is not the solution of choice, there are four main reasons you should consider deploying data tokenization:

  • Risk reduction

  • Building customer trust

  • Meeting compliance regulations and

  • Validating user authorizations

Tokenization reduces data-security risk by shielding sensitive data against prying eyes and protecting your organization against data breaches of all kinds. This is especially important if you’re in the process of adopting cloud technologies, since tokenization can reduce the risk of data being exposed to unauthorized parties.


Build Trust, Toe the Compliance Line


If you do business over the Internet, data tokenization can help foster all-important customer trust. By ensuring correct formatting and secure transmission of all sensitive data, the tech keeps online transactions secure for your customers and your organization alike.

When it comes to processing payments, your company must comply with the strict requirements of the payment card industry (PCI). Here, tokenization helps you achieve the cast-iron compliance necessary to keep your business running.


And finally, data tokenization helps you reliably validate users’ authorizations to view sensitive data. With the vault-based approach, this is done as follows: When someone tries to access masked data, the token is retrieved from the main database and sent to the vault together with the person’s user ID. Before the vault detokenizes and returns the data, it first checks whether the user has the necessary authorizations. If not, access is denied.


Mastering the Challenges of Data Security


As the number of applications that use sensitive data continues rises, companies are facing growing pressure to rethink or update how they ensure compliance with relevant requirements. As I hope to have shown, using tokenization technology to mask such data offers appealing benefits in terms of both security and regulatory compliance.


As ever, if you have any questions about data tokenization or if you’d like to dive deeper into this topic, please reach out to me. And if you want to share your thoughts about or experience with data tokenization, encryption, or other data-securi

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