Slide The Payment Card Industry Data Security Standard (PCI-DSS) requires that every system that transmits or stores credit card data is subject to review and must meet certain standards else substantial penalties will apply. Tokenization is the process of replacing sensitive information, such as credit card numbers, with tokens that are not subject to PCI-DSS. The tokens are “random” values that resemble the sensitive data they replace, but they lack intrinsic value and are therefore useless to hackers. Removing credit card data from all or part of your environment sounds like a good security measure, and it is. The fact that tokenization can be far cheaper in many cases than alternatives such as encryption, makes this solution an attractive one. Here we will examine tokenization and its standing amongst other compliance strategies.

Tokenization is a Key to PCI Compliance

Our Background

RJB created the Token Service, a substitution solution for PCI-DSS compliance. This solution has the virtue of being fast, entirely compliant, and easy to install in legacy systems that currently transmit and store credit card data.

This article is a brief overview of our experience and capability. We hope you will find it useful. For more information, or for advice on your PCI-DSS compliance project, or insight and help with your e-commerce or order management project, don’t hesitate to get in touch.

Payment Data Security

What is PCI-DSS?

Companies today use a number of measures to secure data and resources, including, but not limited to: physical security, network security, user authentication / authorization, and resource or device security. Payment Card Industry (PCI) requirements and security “best practices” mandate additional security measures for stored sensitive credit card data. Stored sensitive credit card data refers to track data, card validation codes, PIN(s), expiry date, or credit card numbers stored on any media e.g. database tables, files (disk or tape), screens, and reports. Large merchants must undergo extensive examinations of their IT security and processes to verify compliance with the Payment Card Industry Data Security Standard (PCI-DSS). Every system that transmits or stores credit card data is subject to review. Small and mid-sized merchants must go through all the same steps as large merchants except the compliance audit, where they are on the honor system. The list of DSS requirements is lengthy – a substantial investment of time and money is required to create policies, secure systems, and generate the reports PCI assessors need. While the Council’s prescribed security controls are conceptually simple, in practice they demand a security review of the entire IT infrastructure. According to Gartner, a company with 100,000 customer accounts spends on average about $6 per account to roll out encryption appliances.

Solutions for PCI-DSS

Solutions for securing stored sensitive credit card data are discussed briefly below in order of preference i.e. Removal is preferable to Substitution, and Substitution is preferable to Encryption. In practice, all three techniques are used in combination to a greater or lesser degree with the typical objective being to lower the cost while remaining compliant. Hence, the order of preference reflects that cost ranking.


Where possible, credit card numbers are removed from the system. For example, a report containing a credit card number may simply have that data removed from the report, thereby eliminating the security requirement.

    • Note 1: Truncation or masking of credit card numbers is a possibility where only a partial credit card number is required. The maximum that can be displayed or stored in the clear are the first 6 and last 4 digits of a credit card. If this limit is not exceeded, the credit card data may be considered as “removed”. If there is no NEED to display both the first six and last four digits, then only display the last four.

    • Note 2: Removal is the only solution that may be used for sensitive authentication data as described in section 3.2 of PCI-DSS “Appendix: PCI Data Storage Requirements”. This includes the card-validation code or value (CVC or CVV – a three or four-digit number printed on the front or back of a payment card used to validate card-not-present transactions).


Credit card numbers are substituted with Token references in all programs, database tables, files, and logs, where such substitution is deemed possible. A token is a number, usually similar to a credit card number in appearance and form, but it is not a credit card number. It’s designed to resemble a credit card number so that it can easily replace a credit card number in a file or a network transmission i.e. the file or message format doesn’t need to change. If credit card data is replaced with tokens, most of the security checks no longer apply since the tokens themselves are not considered sensitive data.Database tables, files, and logs containing Token references are PCI compliant and remain unencrypted. Access to the full credit card number associated with a Token is provided on a “need to know” basis for the duration of the retention policy for credit card data, after which such access is limited to the masked credit card number i.e. the full credit card number must be Removed by a “Purge Process” based upon a well-defined retention policy.


Sensitive credit card data is encrypted using strong encryption technology. Only users with the appropriate credentials are granted authority to decrypt this data. PCI compliant procedures, policies, and processes control all encryption/decryption keys and related authentication/ authorization credentials. Collectively, these are referred to as Key Management processes and procedures.Encryption solutions are dependent upon the underlying storage technology, and therefore need to be dealt with on a case-by-case basis. Encrypted credit card numbers are subject to the retention policy after which they must be Removed i.e. the full credit card number must be Removed by a purge process for that database table or file.

Key Management processes and procedures are related to the encryption solution. For example, tamper proof crypto hardware solutions, also known as hardware security modules (HSM), are generally considered to be the most secure encryption environment. This is primarily because crypto hardware can safely store the most critical encryption key – the Key Encryption Key (KEK), also referred to as a master key. Other encryption technologies that are not based on crypto hardware, either: do not use a KEK (not secure), or store the KEK on disk (less secure), or require that an operator enter the KEK during system startup (can present operational difficulties). There are many crypto hardware solutions available in the marketplace, and serious thought should taken on using such a solution to store the KEK.

What is the Token Service?

The Token Service is a secure application program and database that provides an Application Programming Interface (API) for secure storage of credit card numbers, and the issuance of “substitute” PCI-DSS compliant tokens in their place.

A hash algorithm is used to provide a permanent 1-1 relationship between a Token and a credit card number. This approach ensures that when a credit card is used it will always be assigned the same Token, even if the credit card number had been previously purged from the system, for example due to a retention policy.

The SHA3-256 algorithm is used to provide a hash value for a given credit card that will be used as an index to the Token table. SHA3-256 is a federal government currently recommended standard hash algorithm. Refer to Secure Hashing for further information on government recommendations for hash algorithms.

The input to the SHA3-256 algorithm is a combination of credit card number plus “salt” value. The salt is a randomizing agent that further obscures the method by which the hash value was created. It’s purpose is to make it much more difficult for a hacker to pre-compute the SHA3-256 hash values for a list of valid credit cards, since he/she would not have the salt value that was used for the calculation. For indexing purposes the salt must be predictably generated to ensure that the same input always produces the same output. In this way we can guarantee that the result can be reproducible for future index lookup. Note: The requirement for reproducibility differentiates this approach somewhat from the random salt approach used in a Message Authentication Code (MAC).

Salts commonly used for index lookup include:

    • Characters pulled from an MD5 sum of the card number

    • Characters generated from digits of the card number

    • Proprietary generation based on a combination of factors including XOR, Base64, or simple math

    • Characters pulled from an MD5 sum that is salted with a proprietary set of bits that is treated like a secret encryption key and securely stored

Creating a salt from the message input (i.e. credit card number) to the hash algorithm is sometimes referred to as the Initialization Vector (IV) Message Dependent Approach. For further information about this topic refer to Collision-Resistant Message Preprocessing. As stated in the article the IV Message Dependent Approach “is an extremely simple way of thwarting the known collision attacks”. This approach is ideal for situations where data streaming is not involved during the hash calculation, as is the case for hashing a credit card number.

How Tokenization Reduces Cost for PCI-DSS Compliance

Tokenization reduces cost for PCI-DSS compliance by reducing the scope of the audit process associated with compliance. Essentially, the Cardholder Data Environment (CDE) is reduced in size, since many systems will now contain secure tokens rather than a primary account number (PAN). A properly implemented tokenization solution reduces or eliminates the need for a merchant to retain PAN in their environment once the initial transaction has been processed. With adequate segmentation and process controls, a tokenization solution minimizes the number of merchant system components that need to be protected according to PCI DSS. For more information on how tokenization may be used to reduce costs, visit PCI DSS Tokenization Guidelines


The Token Service API has been performance tested extensively through its Java API as well as its COBOL API. Test results under heavy load show an average cost of encryption/decryption to be about 58 microseconds. Approximately 55 million accesses were made to the Token Service API in 10 different patterns (Use Cases) intended to match processing patterns found in real e-commerce systems.