What is Vaultless Tokenization? 

Vaultless tokenization is a security process that uses non-sensitive tokens to replace sensitive data like credit card numbers or personal information.  

The original data is not stored in a centralized vault.  Instead of keeping raw data in one location, vaultless tokenization uses cryptographic algorithms together with secure key management to create tokens that can only be re-derived by authorized systems. 

Through this method, the risk of having a central point of failure is reduced, and as a result, large-scale data breaches are less likely to happen.  SaaS businesses, software and video games developers perceive vaultless tokenization as a modern technique to secure customer data while supporting increased transaction volumes. 

Here are the steps of vaultless tokenization:  

1. The process begins with client-side encryption.  Sensitive information is encrypted directly within the user’s browser or application before it ever reaches the merchant’s servers.
2. A tokenization request containing the encryption data is sent to the tokenization provider.  
3. The tokenization provider, then, generates a unique token using cryptographic functions and a distributed key management system for enhanced security.  

While both tokenization methods are meant to ensure data security, there is one major difference between them:  

Since vaultless tokenization does not store sensitive data, it reduces infrastructure complexity and eliminates the risk of breaches.  

Because vaultless tokenization does not store raw sensitive information, SaaS businesses employing this method fall outside the PCI-DSS scope.  Of course, this implies less operational complexity.  

However, as a SaaS vendor, it is important to make sure that the vaultless tokenization provider is PCI-DSS compliant.  This ensures that all transactions are fully compliant.  

Vault tokenization is a process that targets industries with high transaction volumes.  These include:  

• SaaS platforms  
• Subscription businesses  
• Videospiele  
• Digitale Marktplätze  
• eCommerce 

Businesses in these sectors most likely operate at a global scale.  They also need to be PCI-DSS and GDPR compliant.

Integrating vaultless tokenization with other existing systems through API.  As such, to keep data secured, tokens can be used across:  

• Billing systems 
• Customer accounts  
• Analytics tools  

Considering the business models of SaaS and gaming companies, which often involve wiederkehrenden Einnahmen, in-app/in-game transactions, and multi-channel sales through distribution platforms, vaultless tokenization’s adaptability could be a factor.

Vaultless tokenization keeps the value of stolen data under control.  Even if a system is compromised, fraudsters cannot reverse Token.  They do not have access to cryptographic keys and algorithms.

This has an impact on fraud risk, Rückbuchungen, and reputational damage, which are all relevant issues for SaaS businesses.