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The Basics of Tokenization. First, what are Tokens? Tokens are unique, randomly generated strings that replace sensitive data, like account numbers (PANs). They can't be reverse-engineered, making them a secure way to handle sensitive information. Payment Tokenization: This process replaces sensitive data with a token stored in a secure vault by a token creator (acquirer, issuer, or payment processor). Merchants use tokens to authorize transactions without ever handling the original data, reducing security risks. Types of Tokens: 1. Non-Format Preserving: Tokens don’t resemble original data 2. Format Preserving: Tokens retain format but scramble numbers 3. Selective Masking: Keeping some original digits for verification 4. Single vs. Multi-use: Single expire after 1 txn; multi-use don't Types of Payment Tokens: 1. Acquirer Tokens: Restricted to specific merchants 2. Issuer Tokens: Created by card issuers for digital wallets 3. Network Tokens: Produced by credit card networks 4. Payment Tokens: Usable across multiple locations 5. Merchant Tokens: Customized for specific merchants Tokenization enhances security and simplifies compliance for businesses handling sensitive payment data. As tokenization becomes more widespread, it will continue to be a crucial tool in protecting both consumers and merchants from fraud. Follow me for daily insights on crypto, payments, and digital assets.