What is Cloud-Based Tokenization?

By Dillon Phillips from TokenEx

As more technologies migrate to the cloud in pursuit of digital transformation, security is no exception. Many people are likely familiar with the term "cloud," but not everyone knows just what is cloud security. Overall, cloud computing offers an effective, affordable, and convenient alternative to traditional computing systems by decentralizing resources for remote access, making them available to users online. The key component of a cloud deployment is the ability to use the internet to reach the data centers needed to operate the cloud computing system.

So what is cloud security, exactly? In practice, the "cloud" actually just means "internet-based." It relies on an online network—a series of servers connected to the internet—to run software, applications, and other cloud services. Cloud computing differs from traditional forms in that it doesn't rely on local access to servers to run, meaning any device with an internet connection (and the proper permissions) can potentially operate the program. The primary benefits are easy access and greater storage capacity. By storing data in the cloud, you can save the space previously required to store it locally on your device.

In terms of security, this can result in significant cost savings for development, integration, and infrastructure. Unlike traditional on-premises security, cloud-based security does not require the purchasing of expensive and labor-intensive hardware and software to run. Because of this, cloud-based security technologies can provide great value without sacrificing the protection of sensitive data.

What is Cloud Security: Cloud-Based Tokenization

Cloud-based tokenization is the method of exchanging sensitive data for an irreversible, nonsensitive placeholder, called a token, and securely storing the original, sensitive data outside of your internal systems. It can be more affordable and easier to integrate than traditional on-premises tokenization. It also further reduces an organization's risk and compliance scope by removing sensitive data from its data environments. Additionally, you can protect that data without sacrificing its utility or the agility of your current business processes by using format- and/or length-preserving tokens as placeholders for the original, sensitive data.

As previously mentioned, on-premises tokenization occurs within a merchant’s network and requires the purchase and maintenance of both software and hardware. This increases overhead by introducing high upfront and ongoing costs. Merchants using on-premises tokenization must also keep sensitive data in their environments, increasing PCI scope and risk in the instance of a data breach.

Cloud tokenization employs a PCI-compliant tokenization provider to manage the secure storage of cardholder data, reducing scope by tokenizing payment card data before it enters a merchant’s environment. This eliminates the need for the expensive hardware, software, and internal controls required to reduce PCI scope via network segmentation. In this instance, that provider is TokenEx, Level 1 PCI-compliant service provider of tokenization software.

What is Cloud Security: On-Premises Tokenization

On-premises tokenization does offer some advantages over its cloud-based counterpart. It gives an organization greater control of its data by storing it in-house and allows it to more easily tokenize data at rest, such as existing databases that are large and not updated frequently. However, because it stores sensitive data in your environment, it necessitates the purchase of expensive hardware and software and requires costly and labor-intensive network segmentation to comply with the PCI DSS Compliance.

At this point, you should be familiar with some of the more high-level benefits of cloud-based tokenization. When compared with on-premises tokenization, it is more cost-effective and results in greater reduction of PCI scope. Moreover, it entrusts sensitive data to security experts for proper compliance and management, reducing the risk of data theft in the event of a breach by removing the sensitive data from your internal systems. Here are some additional benefits of cloud-based tokenization.

Secure Cloud Solutions

Some security professionals have voiced concerns about the rigor of cloud-based security technologies. However, when implemented properly, cloud security solutions are just as secure as local solutions. Cloud-based tokenization—offers a data-centric security approach, which prioritizes the protection of data over simply aiming to meet minimum regulatory compliance obligations.

This strategic approach to data governance enables organizations to identify, locate, and safeguard sensitive data where it resides, isolating it from outside business systems and removing it from their environments to virtually eliminate the risk of data theft and minimize the scope of compliance.

Cloud-Based Security Solutions for Compliance

By removing sensitive data from your environment, cloud-based tokenization can reduce the scope of PCI compliance for the Payment Card Industry Data Security Standard (PCI DSS) and help satisfy many international privacy regulations, such as the European Union's General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

In regard to the PCI DSS, some organizations using our cloud-based security can decrease their compliance obligations to a Self-Assessment Questionnaire A (SAQ A), which reduces an organization's compliance burden to restricting physical cardholder access to sensitive data and maintaining an information security policy.

Cloud Security Solutions for Privacy

Tokenization can secure and desensitize nearly any data element, including personal data, personally identifiable information (PII), nonpublic personal information (NPI), electronic health records (EHR), electronic protected health information (ePHI), and more. This allows organizations to protect the identities and data of their customers.

Tokenization not only secures sensitive data, but it also desensitizes it. It accomplishes this via its ability to deidentify, or pseudonymize, data. Because tokenization desensitizes data—obfuscating it from its original form—it is synonymous with these terms, making it especially useful from a privacy perspective. In fact, the GDPR specifically mentions pseudonymization as an appropriate method for deidentifying data in compliance with its requirements, going so far as to mention incentives for organizations to apply it in Recital 29 and using it as an example of an appropriate technical measure for protecting personal data in Articles 25 and 32.

Cloud Security for Payments

Because cloud-based tokenization turns sensitive data into universal tokens, organizations that tokenize their cardholder data (CHD) can send it to any payment processor, provider, or gateway. This promotes third-party agnosticism and removes payment card information (PCI) from your internal systems while still allowing you to retain ownership of your data.

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For more information about tokenization, visit TokenEx's "What is Tokenization?" page.