# What is tokenization in credit cards and why is it important for the common man?

In the context of Credit Cards, “tokenization” is defined as a process by which the sensitive data is replaced with non-sensitive data. The information on the Pan Card which is essentially the Primary Account Number (PAN) is replaced with a proxy value called a “token”. PAN is substituted by tokens during the transaction. The substitute value has no resemblance to the original card number; it’s a mere string of random numbers. Tokens have virtually no value of their own. They are only used as a reference that draws back to the sensitive data through a “tokenization system”.
The tokenization system is used to secure, obscure and desensitize data by replacing the original data with a distinct value of the equivalent length and format. The tokenization process works by replacing the valuable data from our settings with these tokens. Thus, preventing the original card number from being discovered during transactions. The tokens are capable of retaining essentials of the original data in the interest of maintaining business utility. And then these tokens are sent to an organization’s internal systems for use where the original data is stored in a highly protected token vault.

However, tokenized data is inexplicable, incomprehensible, and irreversible as there is no mathematical relationship between the token and its original number. Simply put tokenization cedes transaction data futile for fraudulent activities since they are unable to reverse the process to uncover the original data.

The tokenization mechanism is used to reduce the risks involved in handling high-value financial instruments which makes it important for people. It is cost-saving and secure. If an infringement of a tokenized setting occurs, the exposed data is worthless to hackers, cybercriminals, virtually eliminating the possibility of any fraudulent activity. It has played an exemplary role in the payment security continuum, protection of sensitive information and, prevention of data breaches, thereby benefitting the common people. Many of the players in eWallet and mobile payments are using tokenization as a key part of their payment security strategy. This has benefited the buying experience of the people by simplifying their shopping practices.