Not enough merchants know about Tokenization—the automated replacement of a credit card number with another (non-sensitive) number at the POS. I say that because, I've been talking to a lot of merchants who are members of the PCI Knowledge Base and only about 20 percent are familiar with the term, and maybe 10 percent know enough to discuss its pros and cons. Yet, this is a technology (and a process) which I see as virtually the only way to get Level 3 and Level 4 merchants into PCI compliance.

It's not about RSA—Most merchants I ask about "Tokenization" think of RSA Security's key fob tokens used for remote system access. For that, we can probably blame Shift4, who claims to have coined the term. At this point, the few vendors who have offerings in this space each have their own unique term: Shift4 talks about 4GO with SafeSwipe™, EPX calls their offering BuyerWall™, and MerchantLink's product is called TransactionVault™, but as a generic, non-trademarked term, "Tokenization" seems to work as well as anything—but more awareness is needed.

It's about reducing merchant risk—The point that these vendors make is that if you don't have the data, then you've outsourced your risk, should anything go wrong. But I've always lived by the principle that "you don't outsource risk," because when it comes time to file lawsuits, the merchant will still get named. The good news is, I've talked to several assessors on the PCI Knowledge Base Panel of Experts, and generally they are supportive of merchants using Tokenization. Some see Tokenization like network segmentation, as a way to move card data "out of scope" of the assessment. Others see it as a type of "Compensating Control." Either way, when the card data's no longer in your POS or other systems, the need for other controls is either greatly reduced or eliminated entirely.

It's about saving money—The few merchants we've spoken with who have implemented tokenization say that the primary motivator was cost savings, followed by PCI compliance and risk reduction. A simple A/B comparison of transaction fees, with and without tokenization, indicated that the ongoing fees for tokenization were low enough to justify switching away from larger, more established card processors, who are typically less flexible in negotiating transaction charges. So, Tokenization has sometimes been driven by, or is at least supported by, the CFO.

Is Tokenization a silver bullet?—I spent too long as Gartner analyst to believe in such things. The merchants I've spoken with have encountered resistance to Tokenization, from several sources. Internally, there are a bunch of applications that use or store card data, from the POS to the data warehouse, as well as Sales Audit, Loss Prevention, and Finance, so making the switch to Tokenization will probably require some programming changes. There are also going to be lots of discussions about how to ensure POS performance and the fear that Tokenization can create a small number of extremely attractive targets for data theves. But we believe that for many merchants these issues can be addressed with less cost and effort than they are spending now on PCI compliance.

Next Week—Tokenization Operations Issues and Case Studies. In coming weeks, we'll be examining the differences and implications of the four new PCI Self-Assessment Questionnaires (SAQs), the impact of server Virtualization on PCI compliance. We're interested in any suggestions re: Emerging Technologies that Impact Compliance, and if you'd like to discuss Tokenization or any other issue related to PCI Compliance or security, send me an email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .