The traditional model of protecting customer data was comparable to building a giant vault, filling it with card numbers and account details, and guarding it to the best of your ability. Vault tokenisation was sufficient for some time, but the amount of data has grown and breaches have become more sophisticated and costly. The average cost of a data breach in 2024 was over US$4.8 million, a 10% increase over the previous year. The tokenisation vault itself has turned into a major target.

Vaultless tokenisation can address current security needs by transforming sensitive data rather than hiding it. With vaultless tokenisation, card numbers, account IDs and personal details become algorithmically generated tokens that can move safely through your systems without ever revealing what's underneath. The vault disappears, along with much of the cost, friction and risk.

Below, we'll discuss how vaultless tokenisation is reshaping data security for modern businesses.

What's in this article?

• What is vaultless tokenisation?
  
• How does vaultless tokenisation work?
  
• How is vaultless tokenisation different from vault-based tokenisation?
  
• What are the business benefits of vaultless tokenisation?
  
• Where is vaultless tokenisation used?
  
• What challenges come with vaultless tokenisation?
  
• How Stripe Payments can help
  

What is vaultless tokenisation?

Vaultless tokenisation is a way to protect sensitive data, such as credit card numbers and bank details, without storing it in a secure "vault." Instead of keeping a lookup table that maps each token to real data, vaultless systems use encryption algorithms to transform that data into tokens. The token looks real (it might even keep the same format or number length), but it can't be reverted without a specific cryptographic key. The original information is never saved in a database, so there isn't a vault for attackers to target.

This method uses format-preserving encryption and strong key management, which can be handled by secure hardware. The result is leaner, faster and safer data protection that minimises both overhead and the risk of a single catastrophic breach.

How does vaultless tokenisation work?

Vaultless tokenisation replaces the traditional database lookup with real-time encryption. This system transforms sensitive data instantly into a secure, reversible token.

Here's how it works:

• Instant protection: When your customer enters sensitive information, it's encrypted the moment it's captured. The raw data never appears in your systems or databases.

• Mathematical transformation: A cryptographic algorithm and a secret key generate a token that mimics the format of the original data (e.g. the same number of digits as a credit card). The token looks legitimate, but it has no usable link to the real value without the key.

• No vault, no lookup: Traditional tokenisation relies on a central "vault" to store the original data. Vaultless tokenisation removes that step entirely. There's nothing stored to retrieve later, which means there's no single breach point for attackers to exploit.

• On-demand access: When authorised systems need the real data (e.g. to process a payment), the tokenisation service decrypts it momentarily within a hardware security module (HSM).

• High performance at scale: Because there's no database to query, vaultless tokenisation can run at incredibly high speeds – with modern systems being able to handle anywhere from thousands to millions of tokens per second. Encryption-based tokenisation can keep pace with enterprise workloads.

Data compromises rose by 78 percentage points from 2022 – 2023. Vaultless tokenisation offers a better way to protect customers and businesses without slowing operations. It replaces storage-based security with real-time, math-driven protection that scales as your business does.

How is vaultless tokenisation different from vault-based tokenisation?

Vaultless tokenisation changes the architecture of data protection by removing the one thing traditional tokenisation depends on: the vault.

Here's how the two models compare:

• Data storage: Vault-based tokenisation stores the original data in a secure database (the "vault") and creates a separate token for use elsewhere. Vaultless tokenisation never stores the original data. It generates tokens algorithmically, so there's no central database of sensitive information to defend.

• Security: Vault systems rely on protection of the vault itself – a single point of failure, if breached. Vaultless systems rely on encryption keys, which can be stored in HSMs. Attackers can't revert tokens without those keys, and there's no vault with a list of sensitive information to steal.

• Performance and scale: Vault-based approaches involve database lookups that slow down as data grows. Vaultless tokenisation uses computation instead of retrieval, which enables nearly instant processing and the ability to scale globally.

• Internal maintenance: Maintaining a token vault means managing backups, access controls and compliance audits for that sensitive database. Vaultless systems reduce that burden.

• Breach exposure: A breached vault can expose millions of records. In a vaultless model, there's nothing to steal because tokens alone are useless without the encryption keys.

What are the business benefits of vaultless tokenisation?

Vaultless tokenisation reshapes how businesses handle sensitive data operationally and financially. Here are some of its benefits:

• Reduced compliance scope and cost: Because sensitive data never lives in many of your systems, parts of your infrastructure aren't subject to the Payment Card Industry Data Security Standard (PCI DSS) or other regulatory audits. That means fewer controls to maintain, faster audits and lower ongoing compliance costs. One 2025 report found that tokenisation in the travel and hospitality sector cut costs related to PCI compliance by an average of 55%.

• Lower infrastructure overhead: Without a token vault to manage, there's no need for database scaling, encryption-at-rest management, or complicated replication. The system relies on encryption, not storage, which simplifies infrastructure and cuts maintenance costs.

• Faster performance and customer experience: Eliminating database lookups makes tokenisation nearly instantaneous – even at scale. When your system processes payments or retrieves customer data faster, customers experience smoother checkouts and fewer transaction delays.

• Better uptime and resilience: Because tokenisation often happens through distributed computation and not a central database, scaling globally or recovering from outages becomes simpler and faster.

• Data protection that travels: Tokens can safely move across internal systems, cloud environments or analytics platforms without exposing sensitive information. Businesses gain the flexibility to improve with data – testing, analysing or automating – without increasing their security risk.

Where is vaultless tokenisation used?

Vaultless tokenisation is common in industries that rely on real-time payments or handle personal data at scale. These can include:

• E-commerce and digital retail: Online businesses use it to secure credit card data during checkout and store only tokens for future purchases. This keeps customer databases out of PCI scope and prevents mass data leaks if systems are breached.

• Subscription and software-as-a-service (SaaS) businesses: Recurring billing platforms use tokens to charge customers securely every month without storing real payment credentials. This reduces compliance costs without complicating billing.

• Financial services and fintechs: Banks and payments platforms tokenise everything – from account numbers to transaction details – to protect privacy and meet data regulations. Vaultless systems enable this at high transaction volumes without the delay of a traditional vault.

• Healthcare and insurance: Sensitive medical and identity data can be tokenised to meet strict privacy laws, such as the Health Insurance Portability and Accountability Act (HIPAA) in the US. Tokens maintain usability for analytics while keeping personal identifiers locked away.

• Mobile payments and digital wallets: Vaultless tokenisation keeps card details secure on devices and in the cloud. This ensures each transaction is authorised without exposing account data.

Wherever real-time data security meets high transaction speeds, vaultless tokenisation fits well.

What challenges come with vaultless tokenisation?

Vaultless tokenisation introduces new kinds of complexity that businesses need to plan for. Here are the main challenges associated with it:

• Key management: Without a vault, encryption keys are necessary. If a key is lost or compromised, encrypted data could become unrecoverable – or worse, exposed. Keys should be stored in HSMs, rotated regularly and tightly controlled.

• Implementation: Vaultless tokenisation depends on cryptographic precision. Weak algorithms, insufficient randomness and bad configuration can all undermine its security. Some organisations rely on vetted vendors or cryptography specialists to achieve this precision.

• Legacy system integration: Older databases and workflows built around stored values or vault lookups might not fit easily into a vaultless model.

• Performance planning: Even though it's faster than a vault lookup, encryption uses a significant amount of computing. Handling millions of tokens per second requires strong infrastructure and careful design.

• Protection during encryption and decryption: The vault is gone, but sensitive data still appears momentarily during encryption and decryption. Those moments – and the systems that manage them – need strict protection and monitoring.

How Stripe Payments can help

Stripe Payments provides a unified, global payments solution that helps any business – from scaling startups to global enterprises – accept payments online, in person and around the world.

Stripe Payments can help you:

• Optimise your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs, access to 125+ payment methods and Link, a wallet built by Stripe.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multi-currency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalise interactions, reward loyalty and grow revenue.

• Improve payments performance: Increase revenue with a range of customisable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorisation rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments, or get started today.