Choosing the correct security technology for your company’s data might be challenging. There are many possibilities, and a lot of industry jargon tossed about, but there isn’t much accurate information to make an informed business decision. To help with this, let’s look at two frequently compared technologies: tokenization and encryption.

Although tokenization and encryption are frequently used interchangeably since they hide critical card data, they are not the same. Customers nowadays anticipate the ease of automated and card-on-file payments and the assurance that their sensitive card information will not be lost or stolen. Tokenization and encryption make a lot of this feasible.

Let’s dive deeper and understand the difference between both concepts.

What is tokenization?

As the name implies, tokenization is converting significant data into random sequences of characters known as tokens.

In its native state, a token has no significance and serves as a bridge between the real data and the token. Moreover, tokenization is not a cryptographic way of converting sensitive data into ciphertext. Therefore, the original data cannot be deduced from the token in a data breach.

Advantages of tokenization

Tokenization software keeps data in a third-party database, relieving your firm of the burden of storing sensitive data. Furthermore, because you are not compelled to retain the employees and resources needed to preserve the obtained data, you are less likely to share that data if you have a data breach.

The tokenization procedure also saves time and money. While converting the susceptible data form does not eliminate the need for your organization to demonstrate compliance with PCI Data Security Standards (PCI DSS) or other compliance standards, it does lessen the effort of your compliance team. In addition, you may save a lot of time and money if you utilize essential software tools and activities to maintain compliance.

What is encryption?

Encryption converts plain text or sensitive information into unreadable encrypted data called ciphertext, generated using an encryption key using mathematical techniques. The text would require an algorithm and a description key if it were to be made readable again.

Advantages of encryption

By encrypting data, You may safeguard various data types, including credit card details, documents, emails, and passwords. Even though tokenization is best for tiny amounts of data, you may encrypt full documents to assure data security.

Algorithms are used in the encryption process to safeguard data and make it quicker. Each character or integer is turned into a random character during tokenization. This is a lengthy procedure.

Without worrying about security flaws, you may share decryption keys with others or obtain remote access to data via the encryption procedure. First, you must discover a safe means to share your original information with the recipient so that they can decrypt it as part of the tokenization process. With encryption, however, they will require the decryption key.

Tokenization Vs. Encryption

1. Definition

Tokenization and encryption are two approaches for securing sensitive data or information often delivered over the Internet. While they are both excellent data security obfuscation techniques, they are vastly different.

Tokenization is the process of replacing sensitive information with a surrogate random value known as a token, which serves as a reference to the original data.

On the other hand, encryption is the process of converting plaintext to ciphertext with the use of a key and an encryption algorithm.

2. Method

The tokenization system produces two databases: one containing the actual data and the other containing the tokens mapped to each data item. It creates a token value for plaintext at random and saves the mapping to a database. Tokenization is similar to encryption, except that the process is irreversible.

On the other hand, encryption scrambles data via a reversible procedure if the appropriate key is used. First, the sender encrypts the plaintext and sends it to the recipient, who decrypts the ciphertext back into plaintext via decryption.

3. Approach

Tokenization masks sensitive data or information by substituting the token value for the actual data. This allows access to the original data. Then, the token server verifies the user or program’s identity, calls the data, retrieves the appropriate token from the token database, calls the accurate data from the actual database, and finally displays it to the user or program.

On the other hand, symmetric and asymmetric encryption are the two most used ways of encryption. A secret key is used for both encryption and decryption in symmetric encryption, whereas asymmetric encryption employs two keys: one to encrypt the data and the other to decrypt it.

4. Uses

The tokenization approach is frequently utilized in credit card processing for enhanced security. Tokenization is most commonly used to safeguard payment card data, bank account information, social security numbers, phone numbers, and email addresses, among other things.

On the other hand, encryption is used to protect both organized and unstructured data. For example, it’s commonly used to secure individuals’ and businesses’ communications from cybercriminals and provide security for electronic transactions over the Internet and data saved on smartphones and other mobile devices.

Which is better for your organization?

The answer is both, whenever possible. Tokenization is required for online and in-store card-on-file and recurring payments. It’s also necessary for companies that have several branches or franchisees. And, Encryption is vital for card-present payments.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.