Vaulted or Vaultless Tokens? Which is Best for Payments?
Blog post from Basis Theory
A token vault is a smart contract-based system that stores sensitive information separately from vendors’ environments and provides non-exploitable tokens that authorized systems can use to retrieve or route data under strict authentication and access controls. Vaulted tokenization centralizes sensitive data in a secure repository, supporting approved downstream uses such as payment processing and recurring transactions while helping merchants meet PCI DSS requirements; it may introduce modest latency but offers security and convenience for stored cardholder data. Vaultless tokenization, described as a form of local encryption, keeps data at the customer side and requires customer-side interaction to use it, which can reduce central storage and give users direct transaction control but limits subscriptions and other future payments. Its reliance on local cryptographic-key protection, limited ecosystem adoption, and lack of PCI DSS recognition for protecting payment account numbers make it less suitable for merchants needing to store and reuse payment data. The passage presents third-party vaulted providers such as Basis Theory as a way for merchants to collect, secure, and route payment information while reducing their own PCI compliance scope and maintaining flexibility in payment-provider choices.
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