What is tokenization and how does it work?
November 28, 2023 4 min read
Advances in financial technology and digital money management tools have made it easier than ever to bank, shop and monitor your accounts on the go. Still, all this online access can bring up some questions and concerns around security.
That’s where technology like tokenization comes into play. Many financial institutions and credit card issuers—including Capital One—use security features to help protect your account information. Tokenization can also make it safer to complete purchases online using tools like digital wallets and virtual cards. But what is tokenization, exactly?
Tokenization is a process that converts your personal information into a unique code called a token.
Tokenization can help protect your financial and personal details, and reduce the risks of exposure of sensitive information during a data breach.
Capital One helps protect cardholders using tokenization when purchases are made with a digital wallet or with virtual cards.
What is tokenization?
In simple terms, tokenization converts sensitive data—like personally identifiable information (PII) or a credit card primary account number (PAN)—into a string of unique, random numeric or alphanumeric units called tokens.
These tokens represent the original data—like your actual card number—but conceal that sensitive information by replacing it with a random value, such as a virtual card number. Tokens usually have no readily apparent relation to your data. That means your information is better protected against fraudsters or data breaches.
Tokenization versus encryption
Encryption is a general term for the conversion of one original value into another alternative value. Many forms of encryption allow a recipient of the alternative value to transform it back to the original value using a mathematical formula, code or algorithm. Tokenization is a form of encryption, but it converts the original information into a randomized code that has no inherent value or meaning (a token). But, unlike some forms of encryption that can be reversible using some mathematical formula or algorithm, only the creator of the token can associate it with the original value.
Examples of tokenization at Capital One
You might encounter tokenization more often than you expect. For example, Capital One cardholders can enjoy the security and convenience of tokenization when:
Using a virtual card from Capital One: Virtual card numbers from Capital One are tokens—they are unique numbers that can be used in place of your actual card number. So when you use your virtual card from the Capital One Mobile app or generate virtual cards with Eno, your Capital One virtual assistant, the merchant will only see the virtual card number, not your actual card number. But Capital One will link the virtual card to your credit card account, allowing you to complete the transaction more securely.
Adding a Capital One credit card to a digital wallet: When you add your Capital One credit card to a digital wallet like Apple Pay® or Google Pay™, a token will be added to the digital wallet instead of your actual card number. Then, when you make a purchase with your digital wallet, it will transmit the token to the merchant instead of your actual credit card number.
Using virtual cards in Google Chrome: When you shop online using the Google Chrome browser or in Android apps, you can choose to save your credit card in Google Pay. If you use Google Pay when checking out in Chrome or in Android apps, you can pay by selecting a virtual card linked to your Capital One credit card account from the autofill drop-down menu, allowing you to quickly check out without using your actual card number. To start using virtual cards with Google Pay, add your eligible Capital One credit card to Google Pay.
Benefits of tokenization
Tokenization can have several benefits for consumers, including:
Increased security: Because tokenization replaces sensitive financial information with a random code, data like your actual card number, bank account number or Social Security number (SSN) may become less likely to be exposed to unauthorized use.
More availability: Tokenization has become more common in both online and in-store shopping experiences, making it easier than ever to check out with more security.
Added convenience: Tokenization may be used during some common, convenient checkout methods, including one-click checkouts or digital wallet transactions.
Additional protections: Payment tokens like virtual cards can be limited to use at a specific store, or subject to spending caps or time frame limitations. For example, once a token is expired or locked, it can no longer be used to make purchases. Similarly, if a payment token is limited to use at a specific store, it cannot be used at other stores.
Tokenization in a nutshell
Tokenization is one of many ways financial institutions and credit card issuers can help protect your data. By replacing your sensitive information with a unique token, you can easily complete transactions using tokens—in a digital wallet or through a virtual card—while helping to keep your actual card information hidden from merchants and fraudsters.
Now that you have a better understanding of how tokenization works, it’s time to see it in action. Get started using security features like tokenization when you add your Capital One credit card to a digital wallet.