Any organization that accepts credit or debit card payments is required to keep that data as safe and secure as possible. The Payment Card Industry (PCI) Data Security Standard (DSS) is the set of regulations established by credit card companies to help protect payment information and are mandated by the credit card companies to ensure the security of credit card transactions.
Tokenization addresses PCI DSS requirement set #3: protecting cardholder data (CHD) at rest. PCI DSS seeks to reduce retention of sensitive data and safely govern its storage and deletion. Tokenization satisfies this critical requirement by eliminating stored CHD from as many systems as possible. Credit card tokenization not only replaces sensitive data, but it also minimizes the amount of data an organization needs to keep on file, which ultimately helps to reduce the cost of compliance with industry standards and government regulations.
Additionally, the responsibility to protect stored CHD and maintain the proper level of PCI DSS certification then falls on the token (solution) provider, so it ultimately reduces the cost of PCI compliance. This makes an especially big difference for organizations that want to support card-on-file or recurring payments.
To learn more, see our article Tokenization, Cardholder Data and PCI Compliance: What you Need to Know.