Tokens are unique identifiers used to represent sensitive data, such as credit card numbers. Tokenization is the process by which sensitive data is replaced with these non-sensitive placeholders, helping to protect payment information and reduce the risk of data breaches.

Tokens do not carry an intrinsic value and can’t be used outside of the specific system that issued them, making them useless if intercepted or stolen. For example, a token representing a credit card number may look like a random sequence of numbers and letters and can only be used by the authorized payment processor to retrieve the actual card number from a secure token vault.

This means that even if a hacker manages to intercept a token during a transaction, they would not be able to use it to make fraudulent purchases because it would be meaningless outside of the specific payment system for which it was issued.

By replacing sensitive data with tokens, merchants can minimize the amount of sensitive data they need to handle and store, reducing their PCI DSS compliance burden and the potential impact of a data breach.