Define Tokenization? What are its types?

Tokenization is a process of transforming sensitive data, such as credit card info or other sensitive data, using identification symbols or tokens. The token contains all essential data, which improves security. Tokenization is used widely in the financial ecosystem, but tokenization is not encryption.

Tokenization makes it harder for anyone to access credit card info, thus helps in case of data breaches.

There are two types of Tokenization being provided:

  • Vault Based Tokenization: It uses a database which acts as a tokenization vault which stores the mapping between the tokenized data such as Social Security Number and it’s corresponding token.
  • Vaultless Based Tokenization: Here the token is generated by some underlying algorithm so that detokenization can be done using the token itself without using a fault whatsoever.