In order to answer the main question , let's explain what tokenization and what is encryption
What is tokenization?
Tokenization is a process of transforming a sensitive data to a non-sensitive data representation as known as a token.
What is Sensitive data?
Sensitive data is a piece or pieces of information that can be used against or in favor of an individual or a business. Sensitive information can be religion, race, social security number, home address, and others details that will lead to real person identification. In payments industry sensitive data is considered the CardHolder data which is called PCI data and personal data which is called PII.
What is encryption?
Encryption is a process to encoding sensitive data and the how the sensitive data is stored in the vault. To decrypt encoded data , authorization keys are required .
Practical difference between Encryption and Tokenization
|Mathematically transforms readable text into a secret or disguised way of writing text using an encryption algorithm and key||Randomly generates a token value for readable text and stores the mapping in a database|
|Managed to large data volumes with just the use of a small encryption key to decrypt data||Hard to scale securely and maintain performance as database increases in size|
|Used for structured fields, as well as unstructured data such as entire files||Used for structured data fields such as payment card or Social Security numbers|
|Perfect for exchanging sensitive data with third party partners and vendors who have the encryption key||Not simple to exchange data since it requires direct access to a token vault mapping token values|
|Format-preserving encryption schemes come with a tradeoff of lower strength||Format can be maintained without any diminished strength of the security|
|The initial data leaves the organization, but in encrypted form||The initial data never leaves the organization, satisfying certain compliance requirements|