What is Tokenization, and Should I Be Using It?

Are you familiar with tokenization? As digital wallets and mobile payments have gotten more popular over the years, hackers have found more ways to steal your information. Tokenization is a process that combats fraud and protects your personal and payment information.

If you’re someone who only uses cash for security purposes or are nervous about using your credit card for online purchases, tokenization may be a service that could change your mind. Let’s explore more of what it is here, as well as its benefits and added security.

What is Tokenization?

Tokenization works by using a stand-in number, or “token,” when storing your card on your mobile device, watch, or anywhere else you input card details online. This token takes the place of your actual credit card number. The token is generally a random sequence of numbers and letters.

The idea of tokenizing credit cards gained momentum in 2001, when organizations identified the benefits of using tokens instead of storing credit card information. The goal of minimizing the risk of theft has always been tied to tokenization, with many groups using the phrase “no data, no theft” to promote the concept.

Tokens aren’t unique to financial institutions. Here are some other industries that also commonly use tokens:

• Government Agencies: defense and public service groups within government typically restrict classified systems or information, requiring tokens for access
• Healthcare: tokens are used in healthcare to protect patient information and comply with the Health Insurance Portability and Accountability Act (HIPAA)
• Education: both students and staff may be required to use tokens to sign into platforms used by their schools or universities

You may even use a token everyday and not realize it!

When Can I Use Tokenization?

Tokenization is a fairly common practice. Here are some simple, everyday instances where you may already be using it:

• Mobile payment services and subscriptions
• Password manager tools and apps
• Search engines and voice assistant tools, which bunch up the words you enter or say for better results

Tokenization is also a great resource if you lose your physical card or if it’s stolen. The token will still be on your device and can be used to complete transactions and mobile payments. If your card is lost or stolen, contact us immediately at 800.754.4128, or click here.

What Makes Tokenization More Secure?

According to the Federal Trade Commission’s 2024 Data Book, credit card theft “topped the list of identify theft types reported in 2024.” Many scammers hope to steal your credit card information to open fraudulent accounts, make purchases, or steal your identity. Tokenization is a great tool, as it prevents hackers from doing these very things.

When tokenization is enabled, you aren’t using your actual credit card number—you’re using a token. This unique code is unreadable, not sensitive, and protects your credit card details. Companies that store tokens have no need to hold onto your personal information as well. Those details are held in a secure, digital vault that won’t need to be accessed when making future transactions with that merchant.

How Can I Tell if My Card is Tokenized?

There are a few ways in which you can tell if your card is already tokenized. Once you’ve added your card to your device’s mobile wallet, you may see a token generated (instead of your credit card number). If it looks unfamiliar to you, it’s most likely your token!

You can also look for signs of your tokenized card on your credit card statement. Terms like “digital wallet” or “tokenized transaction” may be used for any purchases where you used this card through your mobile wallet.

When you’re shopping online, look at the merchant’s website and see if they reference using tokenized transactions. While it’s a good sign if they do mention this, it doesn’t mean they are entirely secure, so still practice regular caution. You can also ask your financial institution or card issuer if they use tokenization.

Other Security Tips You Should Follow

Your own security is incredibly important. Here are some other security tips you can follow to protect your accounts and personal information:

• Multifactor Authentication (MFA): if an app or platform you use offers MFA, you should use it. This process uses another piece
• Fraud Monitoring: see if your credit card offers additional fraud protection for your account. Here at American Heritage, we offer an Identity Checking account that provides services like Card Patrol with Social Security Number Monitoring™ and Payment Card Protection.
• EMV Chip Technology: the chip that is on your card will generate a unique code each time a transaction is initiated 

Tokenization & American Heritage

If you have a card product with American Heritage, you’re in luck! We’re proud to partner with Mastercard for our debit and credit cards, an issuer that uses tokenization. So once your card is added to your device’s digital wallet, you’re all set. For a guide on contactless payments and how to add your card to a digital wallet, click here.