What is Token? Advantages and disadvantages of using tokens

When you research banking services, you will encounter a Token in transaction security.

So what is Token? How is it applied? Let’s find out right away with Timo in the article below.

Table of Contents

What is Token?

Token is a digital signature or an electronic signature encoded into numbers on a specialized device. Token generated is in the form of OTP which means that the code is usable once and randomly generated for each transaction.

Tokens are often applied by businesses for regular transactions and especially online transactions. Do you consider this a mandatory password for each transaction for security purposes?


By using tokenized transaction confirmation tokens, businesses will ensure the accuracy. Once you have confirmed with the Token code, you have signed into the transaction contract without spending any additional documents. Token code has complete legal value like your signature.

What is Hard Token? What is Soft Token?

There are 2 types of Token:

  • Hard Token: Is a compact device like a USB can be carried anywhere. Every time you trade, you will stick to this device to get the code.
  • Soft Token: A software installed on a computer or phone / tablet and this software also provides Token code for you when trading.

Tokens are used in industries with regular online financial transactions such as banks, facebook, tax authorities, …

See also: Security token – by Wikipedia


How token works

The token’s mechanism of action is as follows:

When you perform transactions on online banking, in addition to entering the correct username and password, the system also requires to enter OTP, ie “one time password” – One-time code. These OTPs are generated randomly by the token device.

Token devices will use your account number and the time when you are looking up the code according to a certain algorithm to come up with 6-8 digits that are valid in about 60 seconds and then continue to generate code. new number. You can trust these passwords with absolute confidence because they are generated without the intervention of third parties, constantly being newly created, synchronized and authenticated by servers located in the bank.

How to use token in the bank?

The best way for you to understand how tokens work is to directly perform transactions that require using the bank’s OTP.

The steps to use tokens for banking online transactions are as follows:

  • Step 1: Login to the online service or the official website of the bank that you are using Internet Banking with the username and password previously registered.
  • Step 2: Make the desired transactions (transfer money, top up card, pay bills …)
  • Step 3: Enter the OTP provided by the token to confirm the transaction.
  • Step 4: Complete the transaction.

For the banking sector, Token equipment and Token codes are very important. When a customer transacts online, to ensure that customer information is not stolen or even if it is stolen, the transaction cannot be successful without the OTP. At banks, OTP is usually provided via SMS or Token machine issued by the bank.

The way the bank token machine works is that each machine will be attached a bank account and you will set a PIN for the Token machine. Thus, the Token machine itself will also have 1 layer of security code.

When you make online money transfer transactions, buy goods online, pay bills, … Token machine will generate a type of transaction confirmation code and you press the machine to get the code, enter the last step of the process. success. Note that the Token token will only be valid for a short time, usually 60 seconds.

The OTP sent via SMS is applied free of charge by most banks with E-Banking to secure transactions for customers. As for Token machines, only a few banks provide, including Metrobank, BDO, PSI … and customers have to pay additional fees of PHP 400-800 to be provided with Token machines.

Advantages and disadvantages of using Token

Advantages of using token

  • Token machine is compact in size, you can put it in your wallet and take it anywhere.
  • This is considered the safest way of the bank and the chance of you losing money due to a transaction is not possible.
  • The OTP code is a one-time code, so it is invalidated for the following transactions.
  • Using the Token machine is very easy.


  • To use, you spend the cost of buying Token machine from PHP 400-800.
  • Token tokens are usually only valid for 60 seconds.
  • Token machine is required to be able to trade.
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