What Is Tokenization And How Does It Factor Into PCI Compliance?

Businesses in the payments industry facing massive data breaches are more common than you think. Cybercrimes have affected millions of customers worldwide to date. There are billions of confidential records, including credit card data like the Primary Account Number (PAN) and other personally identifiable information (PII), that are leaked yearly.

To secure the data customers entrust them with, many businesses, such as retailers and service providers, have wisely been looking for alternatives to storing their customer data and exposing themselves to the danger of data breaches due to issues with web application configuration and the significant security risks associated with cloud storage in general.

That’s how Tokenization was developed, as a technique used to secure sensitive data and payment systems. It is currently employed by many companies, especially those that deal with money transactions. Tokenization can also help these companies achieve and adhere to the PCI DSS compliance regulations more effortlessly.

Despite the fact that its use is expanding, many business owners still need to adopt a tokenization solution because they are unsure of what it is, what it can do for them, or how it operates. As a result, they are losing out on a potent tool that can help keep their data environments more secure.

If you are one of them, then this guide on Tokenization is for you. In this blog, we will discuss what Tokenization is and how it factors into PCI DSS compliance, what the PCI DSS tokenization requirements are, the benefits of Tokenization, the difference between Tokenization and encryption, and finally, help you understand if PCI tokenization is the right choice for your business.

What is Tokenization, and How Does it Influence PCI DSS Compliance?

Tokenization is the process of replacing sensitive data with an anonymous placeholder, or token, generated randomly from data in the same format and has no inherent value.

The token can only be “detokenized” using the original tokenization platform and has no exploitable significance. If any cybercriminal attempts to acquire unauthorized access to a database containing tokenized bank account data, for instance, it would prove futile because the attacker would be unable to utilize the token.

Tokenization is not reversible, unlike other security techniques like data encryption, where a mathematical equation can “solve” the data replacement and disclose the original documentation. Tokenization, which has no mathematical connection to the original data point, is commonly regarded as a more secure method of sending and storing sensitive data.

Once the initial transactions have been completed, some merchants who must adhere to PCI DSS use Tokenization to minimize or completely do away with the need to keep cardholder data (CHD) in their environment. By substituting tokens for CHD, fewer cardholder data are present in the environment, and fewer system parts are affected by PCI DSS regulations, making compliance easier.

Organizations pursuing PCI compliance can continue to store, handle, and transmit cardholder data by cooperating with a tokenization service provider while abdicating security-related responsibilities to the tokenization service provider. 

Now, let’s see what requirements tokenization systems need to fulfill in order to be PCI compliant.

What are the Requirements of PCI Tokenization?

No matter which tokenization system you implement, it must be PCI DSS compliant because it stores, processes, and transmits cardholder data. You may then use the tokenization provider’s attestation of compliance to satisfy numerous cardholder data security requirements. 

For this reason, tokenization systems need to suffice a few criteria under PCI DSS compliance, as given below:

  • Only respond to any application, system, network, or user within the defined cardholder data (CHD) environment by the merchant by providing your PAN.
  • Create secure internal networks for all tokenization components, isolating them from unreliable and outside-of-scope networks.
  • Tokenization components must all be created with strict configuration standards to guard against vulnerabilities.
  • Only credible communications must be conducted In and out of the tokenization system environment.
  • Enforce stringent security measures to protect cardholder data when stored and transferred over open public networks.
  • Put strong access controls and authentication mechanisms in place to satisfy PCI DSS Requirements 7 and 8.
  • Support a system that securely deletes cardholder data as needed to comply with a data retention policy.
  • Use logging, monitoring, and alerting to spot any suspicious activity and start the required reaction processes.

What are the Benefits of Tokenization?

In this section, we will describe the various benefits of Tokenization. Whether you are a merchant or a payments provider company implementing Tokenization to simplify PCI compliance, you get to enjoy the following five benefits:

  1. Reduced contact

Using Tokenization, you may keep the original credit card data secure in your own data environment and limit access to the tokens for third parties. The accurate, sensitive data is still stored in a safe cloud vault, inaccessible to hackers and other cybercrime software threats.

  1. Irreversibility

Tokenized information can only be exposed by end-users who are members of the original tokenization platform, such as the payment processor. 

This contrasts with data encryption technology, in which encrypted data can be “solved” with a powerful enough computer or a stolen decryption key.

  1. Adaptability

There are various techniques to tokenize. It can produce single-use tokens, such as one-time credit card transactions, and multi-use tokens, such as when customer credit card data are saved, to facilitate quicker e-commerce checkout processes for subsequent purchases.

  1. Lowered risks of data leaks

Tokenization systems reduce the risk of data breaches by desensitizing the original data with a token while at rest, ensuring that nothing of actual value can be stolen when a security breach occurs. 

However, tokenization systems cannot completely guarantee the prevention of data breaches, and you need additional help to secure all confidential information dealt with in your organization..

  1. Compliance-friendliness

Since Tokenization reduces the amount of data in your organization’s environment relevant to privacy laws, obtaining compliance certifications, especially for PCI DSS and even other frameworks like CCPA, SOC 2, GDPR, etc., is simpler. 

However, it must relieve you of all your responsibilities and any liabilities found during the audit.

What is the Difference Between Tokenization and Encryption? 

Wait… tokenization and encryption aren’t the same thing?

No. Both of these methods are used to secure sensitive data, but they operate completely differently.

Encryption changes plaintext, including sensitive information, into ciphertext, which cannot be read. Encryption is used to prevent unauthorized parties from reading sensitive data. The ability to transform ciphertext back into readable form should only be available to authorized individuals with the decryption key.

Organizations must implement effective key management procedures because encryption necessitates the usage of keys and their management. Without them, those who shouldn’t have access to critical information could obtain the decryption keys.

The real challenge arises here: keeping encrypted data secure through key management. But with tokenization-as-a-service, you do not need any encryption keys at all!

By replacing sensitive data with different, non-sensitive tokens, Tokenization lowers the chance that an attacker will gain access to the sensitive data. Sensitive information can be stored, processed, and sent using tokens.

The biggest, most significant distinction between Tokenization and encryption is that only encryption is reversible because it uses an algorithm to secure the data, which can be broken if the key is weak enough or a bad actor’s computer is powerful enough to solve the algorithm.

Moreover, encrypted data can be transmitted outside the organization, while tokenized information goes nowhere. Only non-sensitive placeholder tokens are transported outside the organization.

Another important way to distinguish Tokenization from encryption is that tokenized data is merely a reference to “real” data that is securely stored in a token vault rather than real data. Owing to these reasons, Tokenization comes out ahead of encryption when you are weighing both options and figuring out which one would be better for your business.

Let’s see whether you should use PCI tokenization for your payments-related business.

Is PCI Tokenization the Right Move for Your Organization?  

If you fit into one of the following categories, tokenization may be a viable option for you:

  • Merchants who want to share card data with different payment processors and utilize it to track sales, conduct fraud checks, and other tasks without ever handling the card data or having it touch their system or logs.
  • Service providers must display card information to clients to give them a one-time use card while still adhering to PCI DSS.

PCI DSS Compliance with Akitra!

Establishing trust is a crucial competitive differentiator when prospecting new SaaS businesses in today’s era of data breaches and compromised privacy. Customers and partners want assurances that their organizations are doing everything possible to prevent disclosing sensitive data and putting them at risk, and compliance certification fills that need. If you have already found your tokenization service provider, it is time to choose the PCI DSS compliance module using the Akitra Compliance Automation Platform. Choose Akitra!

Akitra offers an industry-leading, AI-powered Compliance Automation platform for SaaS companies. Using automated evidence collection and continuous monitoring, together with a full suite of customizable policies and controls as a compliance foundation, our compliance automation platform and service help our customers prepare readiness for PCI DSS compliance standards, along with other frameworks like SOC 1, SOC 2, ISO 27001, ISO 27701, ISO 27017, ISO 27018, HIPAA, GDPR, CMMC, NIST 800-53, NIST 800-171, FedRAMP, and more such as CIS AWS Foundations Benchmark, etc. In addition, companies can use Akitra’s automated questionnaire product to streamline and expedite security questionnaire response processes delivering huge cost savings. Our compliance and security experts will provide customized guidance to navigate the end-to-end compliance process confidently. 

The benefits of our solution include enormous savings in time, human resources, and cost savings, including discounted audit fees with our audit firm partners. Customers achieve compliance certification fast and cost-effectively, stay continuously compliant as they grow, and can become certified under additional frameworks using a single compliance automation platform.

Build customer trust. Choose Akitra TODAY!‍

To book your FREE DEMO, contact us right

Request a Demo & See if We’re the Right Fit for Each Other

cta 2

Request a Demo & See if We’re the Right Fit for Each Other

cta 2

Request a Demo & See if We’re the Right Fit for Each Other

cta 2

We care about your privacy​
We use cookies to operate this website, improve usability, personalize your experience, and improve our marketing. Your privacy is important to us and we will never sell your data. Privacy Policy.

%d bloggers like this: