Pseudonymisation is one of those things that gets thrown around in data protection conversations, but many businesses don’t fully grasp how powerful it can be. At its core, it’s about replacing identifiable data — names, account numbers, emails — with placeholders or tokens that can still be used for processing without exposing the actual personal information. It’s not the same as anonymisation, which makes data completely untraceable. With pseudonymisation, the data can still be linked back to a person if needed, but only with the right key or additional information.
For payments and fintech companies, where handling sensitive data is unavoidable, pseudonymisation can be a game-changer. One of the most obvious uses is in transaction processing. Imagine a payment processor that needs to store and analyse transaction history for fraud detection but doesn’t need access to full card numbers or customer names at every step. Instead of storing “John Smith, Visa 4567-XXXX-XXXX-1234,” the system replaces it with “User_12345, Token_67890.” The business can still track spending patterns, detect suspicious activity, and generate reports without ever exposing the real details.
Another clear example is customer profiling and marketing. Many fintech firms want to personalise their offerings, but using raw customer data can be a compliance nightmare. By pseudonymising data, a company can still understand how different customer segments behave — who spends more on travel, who frequently buys from specific merchants — without directly handling their personal data. A bank, for example, might want to analyse spending trends across its customers. Rather than pulling reports on named individuals, it can work with pseudonymised data, avoiding unnecessary risks while still getting valuable insights.
Regulators are also increasingly expecting companies to go beyond basic security measures. If a fintech company suffers a data breach and all the stolen data is pseudonymised, the impact is significantly reduced. Attackers wouldn’t see real names, addresses, or account numbers — just meaningless tokens that are useless without the decryption key. This could be the difference between a massive regulatory fine and a manageable security incident.
Even within a company, not every employee needs access to fully identifiable data. In a payments business, developers testing a new feature don’t need real customer details. A support team handling refunds doesn’t always need to see full card numbers. Pseudonymisation ensures that only those with a genuine business need can access real data, while others work with masked or tokenised versions.
The key to doing this right is making sure the replacement values (tokens) are generated securely and separately from the original data. Companies need strong access controls, proper encryption, and a clear policy on when and how the data can be re-identified. If the encryption key or lookup table is stored in the same place as the pseudonymised data, the whole point of the exercise is lost.
For payments businesses, the smartest approach is usually a combination of pseudonymisation and tokenisation. While tokenisation is widely used for securing card payments (replacing card numbers with secure tokens that are useless outside of the payment network), pseudonymisation is broader and can apply to all types of personal data, not just financial details.
Done well, pseudonymisation allows companies to comply with regulations like GDPR while still using data in meaningful ways. It’s a balance between privacy and business intelligence, helping payments companies process transactions, detect fraud, and even personalise services — all without exposing customers to unnecessary risks.
- business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com
