Tokenization vs. Encryption: Which One to Choose?

As of today, we can discover that there are different ways to defend meaningful information, each of which has its features and purposes. Sometimes it can be challenging to figure out which technology can suit the best various types of businesses.

Today some of the well-liked technologies are encryption and tokenization, which are regularly disputed and set side by side.

Let's consider both of them.

Data Encryption Features

This method is commonly used to safeguard various data types. These can be information like cardholder data (CHD), personally identifiable information (PII), NPI, etc.

The main thing about encryption is that we modify the actual information with the encryption key. By doing this the data becomes unreadable until we use the decryption key, which returns it to the authentic form.

The encryption method has its advantages but also there are some disadvantages in contrast with the tokenization solution.

Key Differences Between These Protection Technologies

Each of these has its ways to protect meaningful information.

Tokenization replaces confidential data with a random non-confidential unit, called a token. At the same time, the original data is kept in the vault.

In the case of encryption, the initial information is changed using the key. Also, we have a decryption key to read the data. Thus, it is about data encoding, not the replacement as with tokenization.

Tokens replace real data and are linked with it, meanwhile when encrypted, the key decodes the encrypted data and reveals its initial values.

Both tokenization and encryption are aimed to defend data from fraud. Encryption is most commonly used for unstructured fields and databases. Tokenization is best for structured forms of data when it comes to credit cards, Social Security numbers, etc. Often, tokenization solutions are integrated into eCommerce services to provide secure purchases while online-shopping, and also to simplify the whole process. And this is especially useful for subscriptions or recurring payments since customers don't need to enter their card data every time.

Possibility of Data Exposure

As mentioned, we use two keys for information encoding: encryption and decryption. Hence, the main vulnerability of the technology is that intruders who have access to the decryption key can easily expose data.

At its core, encryption is more about confusing the data rather than protecting it. The quality of encryption fully depends on its algorithm. And some problems, which may occur here is that data can be displayed if hacked, despite the algorithm. Because, even with a strong cipher, criminals can still steal the data but will need extra time to perform it.

Industry Standards

Encryption

One of the main problems with encryption in the scope of regulatory standards is that with this one we do not replace data but only change it. Thus even if meaningful information was modified, it is still considered sensitive data from the regulator's point of view.

According to law demands, encrypted data needs further defensive steps to be taken, which may increase the cost of complying with industry rules. In this case, even if encryption protects data, it comes at a significant cost to businesses to fulfill regulatory terms. Problems start when a company does not meet the requirements due to the integration of these solutions, and the algorithm itself turns out to be weak or there are vulnerabilities. Thus, regulators will penalize the company, which will cause additional losses.

It is worth noting that the penalty for leaking data per one account could be $150. At the same time, the fine for being non-compliant with standards may take $25,000.

Tokenization

This one is a preferable option to meet PCI DSS criteria, as this solution replaces all the confidential information input with a non-confidential token.

Tokens are linked to real data that is stored in a secure vault. At the same time, a token itself does not expose real data, but only represents it within internal environments and has no value outside of them. Also, a token does not have a reverse process. Thus, even if hacked, data cannot be revealed, since tokens show only randomly generated strings of characters, which don’t contain any meaningful information.

Tokenization helps to reduce the scope of PCI DSS and also to defend businesses from being penalized by regulators.

Tokenization and Tokens

Some of the main pros of data tokenization vs encryption are not only the higher level of data protection but also the efficiency and flexibility that tokens provide.

Tokens can be customized, which can give us different forms of tokens which replace only part of the information for a better consumer experience. In eCommerce, tokens are often used to facilitate recurring payments or subscription services, by allowing the user not to enter data each time for each deal on the website or in-app. With tokens, some pieces of confidential information can be masked, while other parts can be seen by the user. So it becomes possible to show the user a part of a credit card information to choose which card to use for payment when there are a few options.

At its core, a token is a randomly generated unit that can contain symbols, letters, numbers, and other characters. Tokens may look like these:

• ••• •••• •••• 5151

3131313131313132JD3UFHF163131

Also, custom tokens are useful for businesses as they can be used for various tasks, especially when it comes to marketing strategies. And the best part is that the company can make it without putting sensitive data in danger.

Due to its features, tokenization as technology can give you more security, and it helps to make many processes work in a more efficient way. Also, it allows businesses to decrease the cost of PCI DSS compliance, which makes this technology a preferable solution.