What is tokenisation and how does it work?

Tokenisation is a data security process that replaces sensitive information with unique identification symbols known as tokens. The tokens hold no exploitable value and can be safely stored by an organisation. This process reduces the risk of data breaches and increases convenience, saving time for customers, as they don’t have to re-enter their card details on future or repeated payments.

What is an example of tokenisation?

An example of tokenisation is when a customer opts in to save their credit card details with an organisation. Often as part of an online checkout, or asked by an agent over the phone.

Instead of storing the actual credit card details in the organisation’s systems, the sensitive information is replaced with a non-sensitive equivalent known as a token. This token is a unique identification symbol that holds no exploitable value and can be safely stored by the organisation.

For instance, if a card number was 1234 5678 8765 4321, it would end up looking something like H42YU2QQ98A.

The next time the customer makes a purchase, they can select a saved card, which uses the token instead of re-entering their credit card details. This saves them time and reduces the risk of data breaches.

Is tokenisation the same as NFT?

No, tokenisation is not the same as NFT (Non-Fungible Token).

Tokenisation refers to the process of breaking down a larger piece of data into smaller units called tokens. These tokens are then used as individual units of data that can be analysed, processed, and stored more efficiently.

On the other hand, NFTs are a type of digital asset that represents ownership, or proof of authenticity, of a unique item or piece of content, such as artwork or collectibles, on a blockchain network.

How many types of tokenisation are there?

There are two main types of tokenisation in the payment industry:

Card-based tokenisation: This type of tokenisation replaces sensitive payment card data, such as the card number and expiration date, with a unique token. This token is then used for payment processing, and the original card data is stored securely by the payment processor.

Network-based tokenisation: This type of tokenisation replaces sensitive payment data with a token at the network level, rather than at the card level. This means that the token is generated and managed by the payment network, rather than by the card issuer or payment processor. Network-based tokenisation is typically used for mobile payments, where the token is stored on a mobile device and used to make payments.

How do I tokenise my card?

You cannot tokenise your card by yourself. The process of tokenising a card is typically done by the card issuer or the payment network.

What is the difference between crypto and tokenisation?

Cryptocurrencies and tokenisation are two different concepts in the world of finance and technology.

Cryptocurrencies are digital currencies that use encryption techniques to secure transactions and to control the creation of new units. Cryptocurrencies operate independently of a central bank or government.

Tokenisation is the process of converting an asset into a digital token.

Are digital wallets tokenised?

Digital wallets themselves are not typically tokenised, but they can store and manage tokens. Put simply, digital wallets can hold various types of tokens such as cryptocurrencies, security tokens, or utility tokens, which represent different types of assets. The digital wallet serves as a secure storage and management system for these tokens, enable users to send, receive, and control their digital assets from a single location.

What is the biggest advantage (benefit) of tokenisation?

The biggest advantage of tokenisation is that it can greatly reduce the risks and impact of a data breach or loss of sensitive data for both organisations and their customers.

By replacing actual card data with tokens, hackers or unauthorised users are not able to access sensitive card information, which helps to increase the security and protection of customer data.

Tokenisation also offers benefits such as a quicker payment process for repeated purchases, less chance of abandoned sales or failed payments, and the option to provide payment plans to customers for high-value purchases.