Tokenization: Replaces sensitive data (like a credit card number) with a non-sensitive equivalent called a "token." This token has no intrinsic relationship to the original data but retains the same format (e.g., length, number of digits). This allows systems to perform operations like searching, sorting, and reporting without actually handling the sensitive data. The token can be used in place of the actual card number for many business processes. Then the token can be exchanged for the actual card number when it is necessary to process the payment with the payment processor.
For example, a credit card number like 4111 1111 1111 1111 might be tokenized to TKN-XXXX-XXXX-XXXX.
Data Masking: Obscures sensitive data using techniques like substitution, shuffling, or encryption. While it protects the data from unauthorized viewing, it often makes the data unusable for many operational purposes. For example, if a credit card number is masked by replacing all digits with "Y", it cannot be used for processing a transaction or performing any calculations based on the card number.
B) While both relate to PCI DSS, tokenization doesn't primarily rely on encryption for its core function of substitution. Encryption is often used in conjunction with tokenization (e.g., to protect the token vault), but the key difference is the replacement of data with a non-sensitive equivalent. Masking doesn't necessarily use fictitious values; it can use other methods like scrambling or redaction.
C) Tokenization is not designed for reversible retrieval of the original data within the company's internal systems. The point is to avoid storing and handling the actual card data. The token is exchanged for the actual card number only with the payment processor. The token itself is not reversible. Masking doesn't always permanently alter data; some masking techniques are reversible, but the key distinction is the impact on usability.
D) Tokenization, when implemented correctly (with secure token vaults), does not pose a greater risk. In fact, it significantly reduces risk by minimizing the systems that store or process actual card data. Masking can be reversible or irreversible, but the level of security isn't the primary differentiating factor between it and tokenization. The key difference is usability.