Tokenization Market

Tokenization Market Size (2023-2028)

During the projection period, the global tokenization market is estimated to increase at a CAGR of 21.5%, from USD 3.4 billion in 2022 to USD 8.6 billion in 2028. The growing requirement to be compliant with regulations, as well as the growing demand to create a consistent user experience and maintain fraud prevention levels due to increased financial crimes, are driving the tokenization market. Furthermore, rising demand for cloud-based tokenization solutions and services, as well as increased customer alignment towards contactless payments, will present attractive prospects for tokenization suppliers.

Tokenization is the process of converting sensitive data into non-sensitive "tokens" that can be utilised in a database or internal system without being visible to the general public. Tokenization protects sensitive data by replacing it with an irrelevant value of the same length and format as the original. The tokens are subsequently delivered to an organization's internal systems to be used, while the original data is kept in a token vault. Tokenized data, unlike encrypted data, is impregnable and irrevocable.

Tokenization is the process of removing sensitive information from your system and replacing it with tokens. Most businesses have sensitive data on their systems, whether it's credit card information, medical information, Social Security numbers, or anything else that requires security and protection. Tokenization replaces the data in the environment with one-of-a-kind tokens for each piece of data.

Market Drivers

The increased requirement to safeguard sensitive data and information against compromise is the primary driver of the tokenization market's growth. The tokenization technology has been widely employed to protect sensitive data against fraud. Tokenization offers a variety of benefits, including protection from hackers and thieves, a reduced PCI scope, internet protection, and internal security. Significant factors such as an increase in data breaches and cyber-attacks around the world are projected to propel the industry forward.

Contactless payment systems have grown in popularity throughout the world due to the convenience of making payments without the need for help and the elimination of the need to be physically present to make a payment. Mobile is the most popular contactless payment option among customers. One of the key drivers of contactless payment solution adoption is cost reduction.

Market Restraints

Although tokenization is not a new payment security technology, many end-users still utilise an older payment security method that is more vulnerable than tokenization. For organisations, a lack of knowledge about sophisticated and cutting-edge payment methods is a concern. Unlike encryption, tokenization uses 'tokens' to substitute critical information rather than transferring it from credit/debit cards. Budget constraints also make it difficult for SMEs to replace outdated technology and combat payment fraud with standard security solutions.

TOKENIZATION MARKET REPORT COVERAGE:

Market Segmentation

This report is segmented and sub-segmented into the following categories:

Tokenization Market – By Component:

• Solutions
• Services

The solution category is predicted to gain the largest market share over the forecast years. Many SMEs are turning to the tokenization solution to defend themselves from rising payment fraud and identity theft.

Tokenization Market – By Application:

• Supermarkets/Hypermarkets
• Convenience Stores
• Pharmacies
• Online
• Others

As online purchasing gets more popular, eCommerce companies are devoting more attention to payment security. Even in the event of a data breach, tokenization makes it more difficult to reveal sensitive personal data. While tokenization will not eliminate data breaches, it will assist in reducing the financial damages that may occur as a result of them. As a result, tokenization makes it simple to improve the user experience while maintaining high levels of fraud prevention.

Tokenization Market – By Technique:

• API-Based
• Gateway-Based

The API-Based market led the Global Tokenization Market by Tokenization Technique in 2020, with a predicted CAGR of 19.3 per cent during the forecast period. Over the projection period, the Gateway-Based market would grow at a CAGR of 21.7 per cent.

Tokenization Market – By Deployment:

• On-Premise
• Cloud

Cloud deployment is developing rapidly in the tokenization industry. SMEs are increasingly turning to cloud deployment options because they allow them to focus on their core skills rather than on payment infrastructure. Using cloud-based solutions, businesses can dramatically reduce their software, hardware, storage, and technical staffing costs.

Tokenization Market – By Enterprise Size:

• Large Enterprises
• Small & Medium Enterprises

Tokenization products and services are mostly used by SMEs to comply with responsibilities and mitigate fraud risks. Tokenization solutions are being used by these SMEs to secure sensitive data from network weaknesses and assaults. One of the main goals of attackers targeting SMEs is to gain access to client information, payment details, and other confidential information through their applications. Cybercriminals use automation to attack thousands of applications at once, taking advantage of SMEs' lack of security. To save money, time, and resources, SMEs are increasingly turning to cloud-based tokenization solutions. Tokenization as a Service (TaaS) addresses the financial constraints encountered by SMEs, with the segment increasingly implementing cloud-based tokenization solutions, driving the tokenization market for SMEs to grow.

Tokenization Market – By End-User:

• BFSI
• Retail & eCommerce
• Government
• Healthcare
• Telecom & IT
• Energy & Utilities
• Others

Cybercriminals target the BFSI sector because it deals with money. It displays a large number of financial transactions, which is enticing to thieves. As a result, it is always on the search for advanced payment security solutions and services to protect its employees, customers, assets, offices, branches, and operations; as a result, it owns a significant percentage of the tokenization market by vertical. In the BFSI sector, tokenization solutions are popular and have a high acceptance rate since they help firms manage PCI DSS regulatory compliance. Furthermore, the vertical frequently develop new and enhanced financial goods and services to boost business operations, which attracts fraudsters looking for sensitive client data. The BFSI vertical would have to prioritise payment security with services like smart banking, online banking, and mobile banking.

Tokenization Market – By Region:

1. North America
2. Latin America
3. Europe
4. Asia Pacific
5. Middle East & Africa

The North American tokenization market was worth US$ 591.6 million in 2022 and is estimated to rise to US$ 2751.3 million by 2028, with a CAGR of 24.6 per cent. Regulations like the CCPA, as well as an increase in cyberattacks, particularly payment thefts across industries, are projected to fuel demand for tokenization solutions and services in North America. Customer inclinations for contactless cards and digital-first credit cards are projected to aid the growth of tokenization in North America. Growing eCommerce, smartphone usage for online payments, and access to a variety of services, including online streaming, online gaming, and other government services, are all driving market expansion in North America.

The demand for effective tokenization solutions in APAC is expected to be fueled by government efforts to combat financial fraud, as well as country-specific compliance laws aimed at boosting cybersecurity. Other factors driving tokenization solution adoption include the increased use of smartphones for online transactions and online shopping, as well as the rapid adoption of online transactions, which has opened the door to a flood of new cyber threats. As a result, the number of customers has increased, necessitating the use of tokenization technologies to protect and reinforce payment processes.

The Asia Pacific Tokenization Market is predicted to develop at a CAGR of 22.3 per cent over the forecast period. China dominated the Asia Pacific Cloud Tokenization Market, growing at a CAGR of 21.4 per cent over the forecast period.

The Japanese market is rising at a rate of 23% during this time. Furthermore, during the forecast period, the Indian market is expected to grow at a CAGR of 24.5 per cent. Large Enterprises dominated the Malaysia Tokenization Market by Enterprise Size, with a market value of $59.3 million by 2026. Small and Medium Businesses (SMBs) are growing at a rate of 27.4 per cent per year.

During the forecast period, the European Tokenization Market is expected to develop at a CAGR of 19.5 per cent. During the projected period, the German market will continue to dominate the area, rising at a CAGR of 16.7%. The UK market is growing at a rate of 17.1% per year. Furthermore, the French market is expected to grow at an annual rate of 18.9%. By 2026, the API-Based market had dominated the Spanish market, with a market value of $57.6 million.

The African region accounts for only 2% of the global tokenization market. Central banks in the MEA region are discovering digital currency opportunities, which could boost the tokenization market. The UAE is the leading country, with $27 billion and $61 billion invested in credit agencies and private firms, respectively. Egypt is the most promising market in North Africa, with a $6 billion fund dedicated to SMEs and consumer liquidity.

Market Leader

Mastercard is the leading company in the Tokenization market, with operations in more than 210 countries across the globe.

Key Players

1. Finserv (US)
2. Visa (US)
3. American Express (US)
4. CipherCloud (US)
5. Tokenex (US)
6. Futurex (US)
7. Symantec (US)
8. Liaison Technologies (US)
9. Thales e-Security (France)
10. PayU (Netherlands)
11. AsiaPay (China)

Impact of COVID-19 on Tokenization Market

The spread of COVID-19 has limited the use of currency notes. This constraint transformed the way people use online payments. Gemalto reports that 90% of European business leaders invested in contactless payment solutions. According to a Visa survey, 82% of Taiwanese consumers have used contactless payments. MasterCard had 61% of in-store contactless transactions in the Czech Republic, 41% in Poland, 27% in Hungary, and 27% in Slovakia. According to the Association for Financial Professionals, 66% of Australian cardholders have contactless cards that allow them to tap and pay. These statistics show that customers are increasingly inclined to use contactless payments, and COVID-19 has significantly increased the use of contactless payments.

Recent Developments

• Mastercard has partnered with Lawrencedale Agro Processing India (LEAF), an agribusiness value chain facilitator, to improve financial inclusion and increase the incomes of over 1 million farmers in India. The LEAF Farmer Network was created as a result of the collaboration of the two collaborate (LFN).
• PayU, an online payments solutions provider, announced the launch of 'PayU Token Hub,' a tokenisation solution for businesses that would allow their customers to use saved cards with added security and following RBI standards on October 28.
• Segmint, a global leader in transaction purification and analytics for financial institutions, has announced a partnership with TokenEx, a data security business based in Oklahoma that protects sensitive data to enable crucial digital processes. Segmint has enlisted Payment Tokenization Services from the company, allowing the fintech to lay the groundwork for multi-channel marketing message delivery. The financial services industry is no longer faced with the problem of sharing sensitive data across several platforms.
• In India, Visa, a digital payments firm, has offered card-on-file (CoF) tokenization services in compliance with Reserve Bank of India (RBI) regulations. The CoF tokenization solution will be available from e-commerce companies including Grofers, Bigbasket, and MakeMyTrip, and will be launched in collaboration with Juspay, a mobile-based payment company.