GDPR's enforcement in May 2018 drastically altered the privacy environment and accelerated the adoption of new technologies, such as tokenization. In the past four years, the General Data Protection Regulation (GDPR) has increased public awareness of how data is handled and put significant penalties on businesses that have not complied. GDPR has quickly transformed privacy legislation and become the benchmark by which other privacy regulations in the U.S. and elsewhere in the world are measured. To meet the GDPR compliance standards, security solutions such as tokenization can play a vital role in securing sensitive data sets.
What is tokenization?
Tokenization is a crucial security process that involves replacing sensitive information with non-sensitive equivalents, known as 'tokens'. These tokens represent the original data but do not expose its sensitive details, thereby maintaining data security. This method is commonly used to protect personal and financial information, where sensitive data like credit card numbers are substituted with unique tokens. These tokens can be safely used in databases and internal systems, ensuring that the original, sensitive data remains secure and inaccessible to unauthorized users. Tokenization's strength lies in its ability to preserve the essential information for transactions or data processing while significantly reducing the risk of data breaches.
This makes tokenization an especially valuable tool for risk mitigation and compliance. Tokenization has become a popular method for small and medium-sized enterprises to increase the security of credit card and e-commerce transactions while reducing the expense and complexity of complying with industry standards and government requirements.
Tokenization aims to safeguard sensitive information while maintaining its usefulness for business purposes. Although tokens are distinct values, they retain key characteristics of the original data, such as its length or format, allowing for seamless integration into ongoing business processes. Meanwhile, the original confidential data is securely stored in an external location, separate from the organization's internal systems.
Unlike encrypted data, tokenized data is non-decipherable and irreversible. Tokens lack a mathematical correlation to their original numbers, meaning they cannot be reverted to their original form without separate, independently stored data. Therefore, in the event of a security breach in a tokenized environment, the original sensitive data remains unaffected.
What is a token?
A token acts as a placeholder for a more significant piece of information. These tokens themselves hold minimal inherent value; their importance lies in what they represent, like a Primary Account Number (PAN) or a Social Security Number (SSN). For instance, in the case of a credit card number, the token retains the last four digits while substituting the rest with random numbers. This makes the token secure for database storage. As a standalone piece, the token cannot be exploited to compromise a credit card account, even if accessed by unauthorized individuals.
Tokens can be created through several methods:
- Employing a key alongside a mathematically reversible cryptographic algorithm.
- Implementing an irreversible function, like a hash function.
- Using an index function or selecting a number randomly
In this setup, the token is the information that is exposed, whereas the sensitive data it represents is securely stored in a centralized server, often referred to as a token vault. It is only within this token vault that the original data can be linked back to its corresponding token.
How tokenization works
Tokenization works by removing sensitive data from your system and substituting it with tokens. Most businesses hold some form of sensitive information, such as credit card details, medical records, Social Security numbers, or other data needing security and protection. Through tokenization, companies can still utilize this sensitive data for business operations without bearing the risks or compliance responsibilities associated with internal storage.
To better comprehend tokenization, let's analyze the example of a POS-based or online credit card transaction. PCI standards prohibit the storage of credit card numbers on a retailer's point-of-sale (POS) terminal or in its databases following a transaction. To ensure PCI compliance, merchants outsource payment processing to a service provider that offers tokenization. The service provider is responsible for the issuance of the token's value and the security of cardholder information.
- A customer enters their payment information at a point-of-sale (POS) terminal or an online checkout form.
- The details or data are replaced with a randomly generated token, which is typically generated by the payment gateway of the merchant.
- The tokenized information is subsequently transferred to a payment processor securely. The original sensitive payment data is saved in a token vault within the payment gateway of the merchant. This is the sole area where a token can be mapped to the information it represents.
- Before sending the information for final verification, the payment processor re-encrypts the tokenized data.
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Difference between tokenization and encryption
Digital tokenization and encryption represent two different cryptographic methods for data security. The key difference lies in their treatment of data: tokenization preserves the original length and format of the data it protects, while encryption changes both the length and format.
Encryption renders data unreadable without the corresponding cryptographic key, making the content secure even when the encrypted message is visible. On the other hand, tokenization uses non-decryptable information to stand in for sensitive data. While encryption has been a preferred data security method for many years, tokenization has recently gained recognition as a cost-effective and secure alternative. Often, encryption and tokenization are employed in tandem for enhanced data protection.
Benefits of tokenization
The objective of an efficient tokenization platform is to remove any sensitive payment or personal data from your company systems, replace each data set with an undecipherable token, and keep the original data in a secure cloud environment that is independent from your business systems. Tokenization can be used to protect any type of structured data sets, including cardholder information, Personal Identifiable Information (PII), and Protected Health Information (PHI).
A well-designed and implemented cloud tokenization platform can effectively prevent the exposure of sensitive data, ensuring that attackers cannot acquire any form of usable information, be it financial or personal. The key aspect here is "usable information." Tokenization doesn't act as a barrier to prevent hackers from accessing your networks and data systems; there are many other security systems designed for that purpose. Rather, it serves as a data-centric security measure, operating in line with Zero Trust principles.
Another advantage of tokenization is that an organization may not need to notify affected individuals in the event of a data breach. If a threat actor infiltrates your environment, the only information that could be stolen are tokens, not personal data. In reality, there has been no data breach; consequently, there is no need to send a breach notification.
What information should be tokenized?
Tokenization is frequently employed to safeguard credit card numbers and is mandated by the Payment Card Industry Council (PCI). However, tokenization can help an organization securely retain sensitive data in a variety of scenarios. The Health Insurance Portability and Accountability Act (HIPAA) and the General Data Protection Regulation (GDPR), for example, mandate particular processing, anonymization, and storage of personally identifiable information.
In addition to securing sensitive data, tokenization devalues it. In other words, the process of pseudonymization de-identifies the data, which is an effective compliance method. In addition, tokenization can assist organizations in meeting certain GDPR compliance requirements and data subject requests, such as the right of access and the right to be forgotten.
Types of tokens
As previously established, tokenization is an essential requirement for processing cardholder data. This is necessary given the rise in POS and online credit card transactions. There are three methods of tokenization applicable to this use case: gateway, pass-through, and payment service tokenization.
1. Gateway tokenization
The majority of e-commerce enterprises accept payments using a payment gateway. Gateways feature technology that allows you to save a credit card to their system and receive a token. From then on, when you conduct a transaction, your system transfers the token instead of the credit card number to the gateway, allowing you to remove credit card information from your system. Since each gateway supplies its own token schema, you may be susceptible to vendor lock-in. Switching gateways is frequently an expensive and time-consuming operation, and in some instances, it is prohibited by the gateway.
2. Pass-through tokenization
Some tokenization service providers offer a method known as pass-through tokenization, which allows for the use of your current gateway integration code. This approach capitalizes on your existing technological infrastructure and can be implemented quickly, one of its primary advantages. It's also modular in nature, enabling its application beyond just credit card transactions. This includes integration with most APIs and the tokenization of various types of data, not limited to cardholder information. Pass-through tokenization stands out from gateway tokenization as it facilitates real-time transaction routing to different gateways, thus bypassing the expensive and time-intensive process of transferring card data across diverse payment platforms.
3. Payment service tokenization
Another tokenization technique is the payment services concept. This architecture offers a single API that, once integrated, can route payments to several payment gateways. The payment services approach is optimal for businesses with complex payment requirements, such as making payments across several regions or currencies, or against multiple processors and gateways. In addition to reducing PCI scope and enhancing security, the payment services paradigm precludes payment gateways from managing tokens. In contrast to gateway tokenization, third-party tokens are compatible with all supported gateways.
Protecting your tokenized data
Tokenization's efficacy can be compromised if it is not properly implemented and protected. For example, the only method to guarantee that tokens cannot be reversed is to generate them randomly. Only a (reverse) lookup in the token server database will reveal the original sensitive data included within the token. The generation of random tokens is straightforward, and the size and data type limitations are simple. This should be the default, as businesses would never desire retrievable sensitive data from the token.
Protection of the token server is an additional problem. To guarantee that your tokenization system complies with PCI standards, it is essential to maintain network segregation on your token server. If the server is not effectively safeguarded, the effectiveness of the entire system may be compromised. The token server is in charge of reversing the tokenization procedure, so it must be protected with traditional key management and strong encryption.
The Venafi Control Plane for Machine Identities platform can help you protect the machine identities of your token servers to ensure that your sensitive data are always protected. To understand the perils of machine identity management, download our dummies guide.
Why Do You Need a Control Plane for Machine Identities?
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