*Short version. A longer, more detailed article exists for Premium Members.*

Tokens are poised to be the backbone of the digital economy, particularly in the context of data security. By removing the sensitive information of the card PAN (Primary Account Number) and replacing it with a random code, tokens help significantly reduce the risk of fraud and data breaches.

The concept of token has in fact a long history that stretches way back before the rise of digital technology. Tokens are used in many areas besides payments, such as security, digital authentication, and blockchain.

In payments, tokens are critical for enhancing security by preventing exposure of sensitive data. However, in blockchain, tokens might represent value or ownership within decentralised systems. Meanwhile, in digital security, tokens authenticate users to access protected environments.

Merely 10 years ago, the term “tokenisation” was rarely part of conversations with merchants then. Today, tokenisation has evolved from being an indirect part of payment discussions, often framed within the context of fraud prevention.

The way tokenisation is implemented can vary depending on the payment network or technology being used. The point at which tokens are created and detokenised determines how and where sensitive card data is managed.

This is important because the security and compliance of the entire payment process depend on when and where the actual PAN is exposed.

The PCI DSS directives (Payment Card Industry Data Security Standards) have been, since their inception, a significant driving force behind the adoption of tokens. In payments, PCI tokens are commonly used by merchants, payment processors, and service providers to secure sensitive cardholder data, in compliance with PCI DSS. These tokens can be securely stored across acquirers, merchants, gateways etc (with the actual card data stored in a secure vault) for recurring transactions but only within a specific environment.

In recent years, there has been a growing focus on network tokens, rightly so. Network tokens are issued by card schemes (global or domestic) and offer superior features such as automatic token updates when a card is lost or expires. By being device-bound, they add an extra layer of protection by linking payment data to specific devices and are, by design, interoperable across different platforms and merchants.

#Paymentexperts, any perspectives to share on #PCItoken vs #networktoken?

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