Tokenization Vs Encryption: What’s the Difference?

Data security has become more important now than ever. Whether you are running a startup or a large firm, you need to implement robust security methods to ensure data protection. People need reassurance that their sensitive data stored in the cards and banks stay safe. That’s where tokenization and encryption technologies come into the picture. 

Both tokenization and encryption are often used as interchangeable terms. After all, they serve the same purpose – to protect your sensitive data. So, how do these technologies differ? Let’s understand both tokenization and encryption in brief. 


Tokenization, as the name suggests, is the PCI DSS technology used for converting the important and sensitive piece of information into a set of strings known as tokens. A token is useless for a random person and is only an alternative to the actual information. The major difference between tokenization or encryption is that the former cannot be used to decode the information hidden in the token in case of a data breach. 

It is important to note that there is no way you can retrieve the original information from the token. It consists of the token vault database, which is used to store the data safely. You also have an option to secure the data further with encryption, thus forming a dual-layer of security. 

The token number is converted into the credit card number when it is received by the authorized recipient. That’s when the transaction is validated and executed. An example is a notification you get when you make an online transaction or buy something using your credit/debit card. This notification informs you about the transaction you have made through a specific card, but you only see either the first few digits or the last digits. The rest of the numbers are stored in the token format for privacy purposes. The technology is widely used for online subscription-based businesses that store customers’ information for recurring transactions. 


Unlike tokenization, encryption converts your card numbers and other sensitive data into a code that cannot be deciphered by anyone other than the recipient. Simply put, encryption refers to the technology of putting the simple text into an unreadable code known as ciphertext. This code can be decrypted only by the recipient who has a decryption key.

Technically, encryption means locking your confidential information in a code that is readable by only authorized parties. Only those who have the secret key can decrypt this information. So, as long as the data is in encrypted form, it is meaningless for any random person. Even if this data is hacked by a third party, there is no way the hacker can get the information hi9dden in the codes unless they are the authorized recipient for the code. The person sending the data cannot display the output, as they have no control over this information. But, this information does reverse when the information is received by the authorized user. That is the whole point of this technology. Encryption makes it possible for the sending and receiving parties to secure sensitive data into codes that can only be deciphered by the recipient. Unlike tokenization, this technology is designed to reverse the code and convert it into readable text.

Usually, third parties cannot get access to this information through any means. However, a tech-savvy and smart hacker who knows how to decipher the encrypted codes can fetch the actual information hidden in these codes. That’s why there are different types of encryption technologies ranging from simple to complex ones.

Encryption Vs Tokenization

The purpose of tokenization and encryption is the same – to protect your sensitive data. However, the methods used in each format are totally different. The clear difference is the format used for protecting the data. In tokenization, your data is protected in a token while encryption preserves your data in a key. A few other common differences between these technologies are:

  • Encryption is used for the large volume of data where turning the information into unreadable codes is the easiest way to secure data. Tokenization isn’t suitable for bulk data. The technology is rather recommended for the information you can convert into a token without affecting the performance metrics.
  • Encryption is easy to decode by the recipient, as the information is converted into the actual data as soon as the authorized recipient receives it. Tokenization, however, cannot be deciphered by anyone but the person who has access to the token vault.
  • Encryption doesn’t allow filtering and searching. That being said, the latest encryption techniques that come with a new format have been developed to ensure easy sorting and searching features without affecting security. Tokenization, on the other hand, allows the sender to maintain a proper format without sacrificing security.

Which One is Best?

Now that you know the difference, you must be wondering which technology is best and safer? Both tokenization and encryption offer a great level of security, but the best one for you depends on the type and volume of data in question. Scalability is the main problem with tokenization. The more tokens the sender issues, the higher the chances of errors and collisions. With encryption, the volume of data is never a problem. You can encrypt as much data as you want without compromising on security. 

However, encryption is nothing but a mathematical technique used to convert your data into a set of random codes that can be decrypted. So, further technology is required for protecting crucial information. 


There is no one-size-fits-all security technology for businesses. The security method that works for your startup may not be a feasible option for a large company. As businesses are now moving to the cloud, data security methods are getting more popular. Tokenization and encryption have become important security protocols to preserve your data and store it safely in the cloud. Each security method comes with its share of benefits and risks. That’s why the combination of both is a perfect way to ensure maximum protection for your data.

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