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EURK Team
Digital banking has revolutionized the way people handle their finances, offering convenience through online and mobile services. However, as people increasingly access and transfer financial data digitally, security has remained a top concern. Therefore, tokenization has gained importance.
Enter tokenization, a promising technology that is gaining ground among banks as a way to enhance security and privacy in this new digital era. Join us in this blog as we explore tokenization in digital banking and how it transforms the way we manage our money. But first, let’s explore tokenization!
Tokenization is the conversion of tangible or intangible assets into digital tokens, such as real estate, stocks, or art, with the power of blockchain technology.
Financial institutions are increasingly focusing on the crypto space, addressing issues like crypto custody, anti-money laundering analytics, and compliance as blockchain-based tokens offer transparency and security, replacing card details with unique codes.
Tokenization is used on various platforms, ensuring card details are protected and stored securely with the bank or network. Major banks are experimenting with tokenization.
To better understand how tokenization strengthens security, let's break down the process. Cryptographic techniques first tokenize sensitive identifiers by replacing them with arbitrary values.
For instance, one could substitute a randomly generated alphanumeric string of the same length for a 16-digit credit card number. Digital channels can then freely use this tokenized data without exposing the underlying details.
In a transaction, the bank and merchant exchange tokens instead of real numbers. Simultaneously, the bank maintains an internal ledger that pairs each unique token with the actual account or card it represents.
Tokenization works by:
The thief would not be able to use intercepted or stolen tokens without also hacking into the bank's maintained link. Therefore, this process keeps the whole system secure. This layered security model protects user privacy while preserving seamless digital usability.
Tokenization brings a variety of benefits across the financial sector. As described earlier, it provides core due diligence within digital banking by replacing account details with randomized tokens. This shields customers from exposure if transaction systems experience a data breach.
Outside of banking proper, tokenization also supports investment and capital markets. As per a McKinsey article, over 85% of securities transactions processed on trading platforms today rely on some form of tokenization.
Just as banks tokenize customer accounts, investment banks tokenize sensitive transaction records, orders, and portfolio holdings when transacting programmatically at scale.
Another major area seeing growth in tokenization is payments. Various sources note that India's massive Unified Payments Interface (UPI) network now processes over 500 million token-based transactions monthly between vendors and end-users totally securely and seamlessly.
This exemplifies how tokenization streamlines commerce by hiding sensitive credentials during exchange. It effectively balances security, convenience, and scalability for businesses and consumers alike in this digital age.
With its ability to preserve privacy while digitizing processes, tokenization is rapidly becoming a foundational technology across financial services, from retail banking to investments to next-gen payment networks.
Investment banks have especially embraced tokenization due to the enormity of data they handle daily across global markets. Most securities transactions on professional trading platforms now rely on tokenized identifiers rather than exposing raw, sensitive details programmatically.
Investment banks use tokenization in a variety of ways, such as:
By abstracting away real-sensitive attributes, tokenization simplifies architecture and speeds up digitalization in investment banking, which handles trillions in daily trades globally. It's a win-win for both security and business efficiency.
If you want to learn about tokens and tokenization, make sure to check out “RWA Tokenization," “Tokenized Payment," “Real Estate Tokenization," and “Benefits of Tokenization for Finance Companies.”.
The bank gathers all sensitive attributes requiring tokenization, such as login credentials, transactions, balances, etc.
The data format, structure, and cryptographic techniques used to tokenize various types of attributes determine the technical specifications.
They programmatically generate tokens as unique (but meaninglessly encrypted) stand-ins for real values using selected methods like hashing.
An internal mapping ledger securely pairs each generated token with its corresponding real attribute value.
Across internal and external systems, including when transacting with partners, tokens seamlessly replace actual data.
Tokens may periodically refresh to further abstract track attributes from rogue parties. Mappings are updated accordingly.
Robust access controls regulate who can encode and decode mappings and utilize tokens according to their assigned privileges and functions.
When implemented properly across banking architectures, this full tokenization lifecycle helps unlock seamless, privacy-protecting digital services for customers.
Major global financial institutions leading tokenization adoption include (but aren't limited to):
As open banking further takes off globally, innovative startups like N26 are also tokenizing customer data when sharing it selectively with partners. Tokenization clearly represents the future of protecting individuals and institutions alike in finance's rising digital landscape.
Tokenization has emerged as a game-changing security approach for banking and finance thanks to its ability to seamlessly and cost-effectively protect sensitive digital interactions.
By masking real identifying traits with randomized encrypted stand-ins, it shields customers and businesses from exposures without compromising usability. Tokenization's layered approach effectively future-proofs institutions against evolving cyber threats, too.
With estimates that over 80% of transactions will involve some form of tokenization by 2030, this technology has understandably piqued interest across the sector. Innovators building the decentralized finance of tomorrow are no exception, like EURK.
With the efficiency of EUR, EURK, a securely audited euro stablecoin, leverages tokenization to facilitate transparent on-chain transactions.
Whether you're an individual wishing to securely self-custody digital euros or a business exploring more open finance models, exploring EURK euro stablecoin could be a smart next step. As a secure euro stablecoin platform, EURK provides robust security for its users with the stability of stablecoin.
Become a partner today and explore the benefits of the best euro stablecoin with your compatible euro stablecoin wallet. EURK is available on secure crypto exchanges such as Coinstore and KoinBX and secure banks such as Bank of Central and The Kingdom Bank. Explore the future of DeFi with EURK!
