Tokenization Market Size, Share, Industry, Forecast and outlook (2024-2031)

Tokenization Market is By Component (Services, Professional Services, Managed Services, Solutions), By Tokenization Technique (API-Based, Gateway-Based), By Deployment Mode (Cloud, On-premises), By Organization Size, Large Enterprises, SMEs), By Application (Payment Security, User Authentication, Compliance Management), By End-User (Banking, Financial Services and Insurance, Retail & E-commerce, Energy & Utilities, Healthcare, IT and ITeS, Government, Other), and By Region (North America, Latin America, Europe, Asia Pacific, Middle East, and Africa) – Share, Size, Outlook, and Opportunity Analysis, 2023-2030

Tokenization Market Overview

[150 Pages Report] The Tokenization Market is expected grow at a CAGR of 21.10% during the forecast period (2023-2030). Tokenization protects sensitive data while allowing it to be used for commercial purposes. Tokenization differs from encryption, which involves modifying and storing sensitive data to prevent it from being used for business objectives. Encryption is like a lockbox, while tokenization is like a poker chip. Encrypted numbers can also be decrypted with the appropriate key. On the other hand, Tokens cannot be reversed because the token and its original number have no mathematical relationship.

Tokenization is a process that turns sensitive data into nonsensitive "tokens" that can be utilized in a database or internal system without bringing it into scope. Even though the tokens are unrelated values, they maintain certain aspects of the original data, such as length or format, allowing them to be used in business operations without interruption. 

The original sensitive information is then stored securely outside the company's systems. Tokenized data, unlike encrypted data, is usually unbreakable and irreversible. The distinction is very significant: Tokens cannot be returned to their original form without the existence of extra, separately stored data since there is no mathematical relationship between the token and its original number, due to which if a tokenized environment is breached, the original sensitive data will not be compromised.

Tokenization Market Scope

For More Insights Request Free Sample

Tokenization Market Dynamics

Growing cyber crimes have escalated the demand for the tokenization market.

Cyber-attacks are rising and a greater demand for data protection comes with them. Criminals target businesses that accept credit and debit cards because payment information contains a plethora of intelligence. 

Tokenization shields companies from the financial consequences of data theft. Even if there is a breach, there is no personal user data to grab. Credit card tokenization aids online businesses in improving data security from the moment of data capture to storage by removing credit card details from POS machines and internal systems.

Furthermore, data security is one of the primary drivers of the global tokenization market size since it protects sensitive data by issuing coupons. Due to the risk of coronavirus spreading through surfaces, COVID-19 has placed restrictions on the usage of money and the only way to deal with this problem is to utilize an online payment option. 

People prefer to pay for things online with their phones. And as more people utilize online payment technology, the chance of a cyber-attack rises, prompting individuals to turn to tokenization technology to deal with it. Therefore various companies are coming into play to uplift the market share for the tokenization market in the forecast period. For instance, in June 2021, to combine Voltage SecureData with Amazon Macie, Micro Focus teamed with Amazon Web Services (AWS). The collaboration offered AWS clients automatic risk remediation, reducing the chance of a data breach while ensuring compliance with data privacy regulations.

An increase in complexities of the system and lack of skilled workforce has hampered the market share for the tokenization market

Tokenization works by creating tokens and storing the actual values of credit and debit cards in token vaults. The complexity of tokenization management is increasing as storage space becomes more limited. 

The use of online payments has increased dramatically since the outbreak of COVID-19. Because of the rising reliance on internet payment methods, these channels have become a favored target for cybercriminals. Thus, to conduct successful real-time screening after tokenization, it is necessary to understand and analyze numerous parameters surrounding each transaction as part of an optimized fraud rule set, which is complex and time-consuming. The understanding involves the preservation of the Bank Identification Number (BIN), which specifies the issuer, card type, and country of issuance.

Furthermore, Technology is useful for the people who utilize it. The technology cannot deliver actual value if employees do not provide input data or pull the appropriate reports due to the skilled labor required to improve the product's market dominance. Simplifying what has become exceedingly complex organizational cultures across the industry will aid in adopting reliability and digitization. 

Leadership supports the behaviors and beliefs required for organizational reliability by developing a training program for all employees, which aids talent retention and corporate success. Training includes dependability principles, the relationship between reliability and maintenance and operations, and how to use tokenization technologies to assure data security and compliance standards. Thus the requirement for skilled labor to carry out the tokenization process more efficiently has majorly challenged the market for the product.

COVID-19 Impact on Tokenization Market

COVID-19 benefited the global tokenization market, which grew from US$XX billion in 2020 and is expected to reach US$xx billion by 2025. The market growth is due to individuals staying indoors and using online payments for shopping; the amount of online payments has surged dramatically since the COVID outbreak. 

Fraud, phishing, and counter-attacks have increased as online payments have grown. Attackers are enticed to steal sensitive and important money-related data because many businesses rely on online payment services. As online shopping has grown in popularity, the necessity for payment security has grown in importance. 

Furthermore, due to COVID-19, contactless payments have emerged as a critical solution for all organizations, allowing them to advance their operations while safeguarding their safety in the coronavirus pandemic. Contactless payments are now widely seen as a viable means of assisting businesses in overcoming the negative impacts of the COVID-19 pandemic. Even the World Health Organization appears to agree. "Whenever possible, contactless payments should be used to decrease the risk of transmission," the WHO advises.

Furthermore, Due to the COVID-19 outbreak, several governments have implemented stringent lockdowns, shutdowns, and mobility restrictions to prevent the virus from spreading. Vendors believe tokenization solutions are expected to be in high demand in 2020. Border closures, strict lockdowns, and supply chain concerns all operate as roadblocks to the onsite deployment of the Tokenization solution.

Tokenization Market Segmentation Analysis 

The global tokenization market is segmented by component, tokenization technique, deployment mode, organization size, application, end-user, and region.

API-based tokenization has seen immense popularity due to the scalability of servers, loosely coupling, and mobile-friendly behavior 

The global tokenization market is segmented into API-based and gateway-based based on tokenization techniques. Out of the two mentioned tokenization techniques, API-based tokenization has seen immense popularity due to the scalability of servers, loose coupling, and mobile-friendly behavior. API tokens allow users to bypass two-step authentication and single sign-on (SSO) in cloud apps and receive data from the instance using REST APIs. 

Admins can inspect and revoke API tokens used by their managed accounts using token controls. Admins may see and manage API tokens that users in their company have created by going to each user's account details page under Managed accounts. 

Many companies have started investing in API-based tokenization due to the rising demand in developed countries. For instance, on December 15, 2021, In India, Skyflow announced the availability of their Data Privacy Vault API. The vault is hosted on virtual private clouds running on Indian servers. It includes industry-leading security and compliance capabilities, such as a tokenization system that helps organizations storing data in India comply with the Personal Data Protection Bill of 2019. Furthermore, in 2021, PayPhi, Phi Commerce's API-first digital payments platform, was certified as the first NPCI Tokenization System (NTS) tokenization service to support RuPay card tokenization. RBI has published a set of guidelines to save sensitive customer information in the form of encrypted 'tokens' to improve the security of online transactions. 

To comply with this regulation, the National Payments Corporation of India (NPCI) announced the development of the NPCI Tokenization System (NTS), which supports card tokenization as an alternative to merchants holding card details.

Global Tokenization Market Geographical Share

Asia-Pacific economies are seeing substantial growth in expanded payment innovation, particularly in e-Commerce, as a result of expanding technology advancements and rising internet and smartphone usage leading to create demand for the tokenization market in the forecast period 

The Asia-Pacific tokenization market is expected to proliferate in the forecast period. Asia-Pacific is one of the world's fastest-growing regions. Due to the high use of tokenization technologies, it is likely to be the fastest-growing market. 

Japan and China, two of the region's most technologically advanced countries, are market leaders in tokenization. Asia-Pacific economies are seeing substantial growth in expanded payment innovation, particularly in e-Commerce, due to expanding technology advancements, rising internet and smartphone usage, and the growing presence of many enterprises. Consumers employ various payment options for online transactions within and beyond the region. As a result, Asia-Pacific businesses are seeing increased demand for secure payment solutions.

Tokenization Companies and Competitive Landscape

The global tokenization market is highly competitive with local and global key players. Some key players contributing to the market's growth are Futurex, CardConnect, MeaWallet, TokenEx, Verifone, Fiserv, Visa, Mastercard, Micro Focus, American Express, Thales, Lookout, Bluefin, AsiaPay, Worldline, Paragon Payment Solutions, Marqueta, Payrix, Sequent, Sygnum, SecurionPay, Carta Worldwide, and others. 

The major companies are adopting several growth strategies such as product launches, acquisitions, and collaborations, contributing to the global growth of the tokenization market.

For instance, In June 2021, to combine Voltage SecureData with Amazon Macie, Micro Focus teamed with Amazon Web Services (AWS). The collaboration offered AWS clients automatic risk remediation, reducing the chance of a data breach while ensuring compliance with data privacy regulations.

VISA Inc.

Overview: Visa Inc., headquartered in Foster City, California, is an American international financial services firm. It supports electronic funds transfers worldwide, with Visa-branded debit cards, credit cards, and prepaid cards being the most frequent methods. Visa is one of the growing companies globally.

Visa does not issue cards, grant credit, or set rates and fees for consumers; instead, it sells Visa-branded payment products to financial institutions, which they then use to offer credit, debit, prepaid, and cash access services to its clients. 

Product Portfolio: Visa Token Service (VTS): The Visa Token Service (VTS) inspires trust in digital commerce. VTS offers value-added services and three important technologies to help you enhance authorization, minimize fraud and lead from the front as customers become more reliant on digital payments.

VTS is the global tokenization platform's foundation. VTS provides richer, more secure digital payment experiences for millions of customers daily by replacing Visa card information with tokens. Visa leads the token transformation through VTS by contributing to and implementing industry standards worldwide.

Key Development

In June 2020, with Visa Direct's support, Visa's real-time push payments technology, and Visa Cloud Tokenization, Visa's new cutting-edge security capabilities, Visa teamed with Facebook to make payments on WhatsApp possible.