Evan Schuman's StorefrontBacktalk

A 403 Labs QSA, PCI Columnist Walt Conway has worked in payments and technology for more than 30 years, 10 of them with Visa.

It’s now been four months since the PCI Council’s guidance on tokenization, and people are still mixing up tokenization and encryption. They are also drawing incorrect parallels/inferences. Tokenization is not encryption. Trying to compare the two is not appropriate (or like comparing quarks to streetcars or your other favorite silly similes), and doing so can lead to mistakes in scoping PCI.

By the way, after much effort, I think I finally found a real-world example of what a high-value token should be. Let’s say I want to use my payment card at a merchant, but I don’t want that merchant to have my PAN for whatever reason. Let’s also say I can give my PAN to a trusted issuer or service provider, and that company in turn gives me a token to use at that untrusted merchant. Because that token—whatever it looks like—could be used by me (or anyone) to initiate a new transaction against the underlying payment card, that token would fit the definition of a high-value token requiring additional safeguards. I might even consider that high-value token to be in PCI scope.

The PCI Council’s tokenization guidance was designed to help merchants (and QSAs) determine PCI scope with tokenization. The document specifies seven objectives to be met for tokens to be considered out of scope, plus another eight recommendations to reduce scope with tokenization.

Everyone should note that the guidance is just that: guidance. Although everyone reads the same document, some merchants, vendors and QSAs may come to different conclusions as to what is and is not in scope with tokenization. I attribute at least part of this situation to a muddling of tokenization and encryption in people’s minds. Whatever the reason, the result for a merchant implementing tokenization is that it may find itself in a protracted argument internally, with competing vendors or maybe even with its QSA as to what is in and what is out of PCI scope.

Tokenization has the potential to both reduce a merchant’s PCI scope and limit the risk of a cardholder data breach. The technology reduces scope by restricting cardholder data to the token vault, which should be properly segmented from all other systems and protected like the crown jewels. It reduces the risk of a data breach, because everybody in the organization now uses tokens instead of cardholder data. So, theoretically at least, there should be a lot less PAN data to be compromised.

Merchants implement tokenization in one of three general ways: The solution can be outsourced to a third party, such as a processor or specialized tokenization vendor; it can be developed internally by the merchant; or the merchant can adopt a hybrid approach using a third-party solution but hosting it internally.

Irrespective of the implementation, tokenization differs from encryption. For example, encryption is reversible while random tokens are not. In terms of scope, the PCI Council settled the question of whether encrypted data is in or out of scope in its FAQ #10359, which states: “encrypted data may be deemed out of scope if, and only if, it has been validated that the entity that possesses encrypted cardholder data does not have the means to decrypt it.” Therefore, if anyone in the organization can decrypt the data, the encrypted data is in scope everywhere it appears. Conversely, if no one can reverse the encryption, the encrypted data is out of scope.

Tokens, however, are not (or at least should not be) reversible.