Tokenization Market Size & Share Analysis - Trends, Drivers, Competitive Landscape, and Forecasts (2024 - 2030)

Tokenization Market Facts

Tokenization Market Analysis

The global tokenization market size was USD 3,528.6 million in 2023, and it will advance at a CAGR of 20.0% during 2024–2030, to reach USD 12,605.4 million by 2030. The industry growth is primarily attributed to the rising incidence of financial frauds and the increasing need to secure payment gateways. Meeting security standards to prevent a data breach, while ensuring smooth customer experiences, is also expected to drive the growth of the market in the forecast period.

The increasing data breach incidence, rising payment regulatory compliance, and concerns about payment security are some of the key drivers for the market growth. North America controls a large portion of the market because of the rapid shift of organizations toward the cloud and exponential mobile usage. Additionally, the region is the largest market for cloud solutions.

Tokenization is being used widely in several industries due to the increasing demand for enhanced customer experiences. It helps industries improve their operations and productivity, make a better decision regarding payment modes, manage assets better, and safeguard client data. Additionally, the swift digitization of business and launch of new products by the market players results in the greatest revenue contribution of North America.

Impact of COVID-19 on Tokenization Market

COVID-19 has had a positive impact on the tokenization market. Upon the outbreak, the number of users making online payments increased drastically because of the government mandates to stay home. This compelled people to use online platforms and payment systems for shopping. Hence, a number of companies across industries leveraged the rising popularity of contactless payments to drive their business forward, along with complying with the safety guidelines of governments around the world. The increasing volume of contactless payments led to a high incidence of cyberattacks and financial fraud. COVID-19, thus, had a positive impact on the global tokenization market, as banks have been quickly adopting these solutions and services to make online transactions quicker and safer.

Tokenization Market Trends & Drivers

Increasing Inclination of Customers toward Contactless Payments

• QR-code payments increased rapidly in popularity during the COVID-19 period as they are contactless and, thus, can reduce the risk of virus transmission.
• Contactless payments are also becoming popular because consumer electronics companies are launching smartphones and tablets that are compatible with new payment apps and platforms.
• In addition, according to the National Payments Corporation of India, Indian UPI transactions increased by 73% in 2022 from 2021.
• Moreover, in 2021, mobile payment transaction value reached USD 1.7 billion, which was 27% more than the previous year. Mobile payments are already the second-most-popular payment method after touch debit/credit card payments.
• Tokenization makes such payment transactions more secure and safe and enables users to make quick payments, without worrying about their card data.

Booming BFSI industry

• The demand for safe and secure digital payments is increasing globally. Nowadays, banks are using EMV transactions and secured card-on-file tokenization, wherein tokenization reduces the risk of data breaches.
• Banks are under immense pressure to address financial frauds, while ensuring customer satisfaction. Tokenization addresses this challenge and helps banks offer diverse payment offerings and enable customers to make protected transactions, thus offering exponential value to these institutions.

Lower Risk of Data Breaches with Tokenization

• Criminals target companies that accept credit and debit cards, because the payment data contains a wealth of intelligence. Tokenization protects businesses from financial data breaches by making it unavailable for theft.
• Credit card tokenization helps improve data security and enables users to complete the payment without worrying about their sensitive card data. Tokenization usage is rising because of the booming demand for secure payment gateways and surging cases of financial fraud.
• According to the SelfKey foundation, more than 5.4 million Twitter users’ personal data, including email IDs and phone numbers, was breached in January 2021. Moreover, in April 2021, more than 533 million Facebook users’ personal data was breached. Hence, multiple regulations and consumer protection schemes drive the demand for tokenization solutions for digital transactions. Apart from credit/debit cards, bank account details can be tokenized and securely used during online payments.

Surge in Number of Online Transactions

• A multitude of payments are made online nowadays, which is why the risk of fraud and cyberattacks is rising. Hence, financial entities are implementing tokenization to make card transactions safer and more secure.
• Tokenization enhances card transaction security, which is also the major concern that drives its adoption. Financial endites can protect users’ card information with the help of tokenization during online, in-store, and mobile in-app purchases. In developing economies, 71% adults have an account with a bank, other financial organization, or an e-wallet.
• Further, according to the United Nations Conference on Trade and Development, consumers are rapidly shifting to online buying, as a result of which e-commerce’s share in the total retail sales rose from 16% in 2019 to nearly 19% in 2020.
• E-commerce sales further jumped to USD 26.7 trillion after the COVID-19. In the U.K., online retail sales value increased from around 15.8% in 2019 to 23.3% in 2020 of the totals, while in the U.S., the share rose from 11.0% in 2019 to 14.0% in 2020.

Complications with Adoption of Tokenization

Since the COVID-19 pandemic, the use of online payments has increased massively, due to which the risk of fraud and cyberattacks is also increasing. And, although companies across verticals are using tokenization to limit data breaches and cyberattacks, there are certain factors that might make it difficult for this concept to find mass acceptance in the immediate future. In particular, the deployment of tokenization creates tokens, which store the actual values of the cards in token vaults, thereby creating the requirement for a large storage space.

Moreover, people do not have an idea about the benefits of tokenization during the payment process and are, thus, still using the older payment security systems. Moreover, small and medium-sized BFSI firms, especially in developing countries, do not have enough capital to procure the expensive tokenization solutions from IT vendors.

In-Depth Segmentation Analysis

Component Insights

• Based on component, the solutions category accounted for the larger market share, of around 70%, in 2023, and its revenue is expected to register a CAGR of around 20.2% during the forecast period. The demand for tokenization solutions is rising because different types of tokens can be used to verify a user’s identity, from software tokens to physical tokens.
• The essential need to protect transactions in any commercial context, by safeguarding cardholders’ data, such as magnetic swipe data, PAN, and cardholder information, is the major driver encouraging banks to adopt tokenization solutions.

During the study, two components were covered in the report:

• Solutions (Larger Category)
• Services (Faster-Growing Category)

Application Insights

• In 2023, payment security held the dominant market share. This can be attributed to the rising demand for advanced payment security solutions, especially in online retail sector. The increasing necessity to safeguard online business transactions from sophisticated cyberattacks has driven this growth.
• During the forecast period, user authentication is expected to experience the highest compound annual growth rate (CAGR). This growth is attributed to the implementation of advanced payment security measures and the imperative to thwart unauthorized access to devices and networks. The rise in the number of cyberattacks targeting financial technology service providers, coupled with an increasing demand for safeguarding user payment transaction data, is driving the demand for user authentication solutions.

The following are the biggest applications of tokenization solutions and services:

• Payment Security (Largest Category)
• User Authentication (Fastest-Growing Category)
• Compliance Management

Organization Size Insights

• The large enterprises category accounted for the larger market share, of around 75%, in 2023, and it is expected to register a CAGR of around 20.4% during the forecast period.
• The increasing number of frauds and cyberattacks has led to the rising adoption of tokenization solutions by large enterprises to enhance their security and combat future attacks.

During the study, organizations of two sizes were covered in the report:

• Small & Medium Enterprises (Faster-Growing Category)
• Large Enterprises (Larger Category)

Deployment Mode Analysis

• The cloud category is expected to record the faster growth in the tokenization market, at a CAGR of around 20.8%, during the forecast period.
• This mode of deployment is highly advantageous because merchants are not required to make massive investments in secure payment software, which contains information such as credit card details and passwords.

 Below are the major deployment modes via which tokenization solutions are accessed:

• Cloud (Larger & Faster-Growing Category)
• On-Premises

End Use Insights

• The BFSI category accounted for the largest market share, of around 40%, in 2023, and its revenue is expected to register a CAGR of around 20.9% during the forecast period.
• This is owed to the surging demand for convenient and secure digital payments. Tokenization solutions provide diverse payment offerings, which are not just limited to card payments, while ensuring security and safeguarding the transactions in any environment of commerce.

During the study, we came across the following key end uses:

• BFSI (Largest Category)
• Healthcare
• IT & Telecom
• Retail & E-Commerce (Fastest-Growing Category)
• Education
• Others

Asia-Pacific to Grow at 20.5% CAGR

• The APAC market is projected to witness the fastest growth in the coming years, at a CAGR of over 20.5% attributed to the presence of key economies, such as India, Australia, China, South Korea, and Japan, which are rapidly deploying tokenization solutions.
• Japan and China are the major markets for tokenization in the region due to their technologically advanced capabilities in smartphones and the development of digital payment methods, specifically in the e-commerce sector.
• This, in turn, boosts the demand for secure payment gateways for online transactions. Hence, the growing trend of online shopping is expected to drive the adoption of tokenization solutions by retailers during the forecast period in APAC.

The regions and countries analyzed for this report include:

• North America (Largest Regional Market)
  • U.S. (Larger and Faster-Growing Country Market)
  • Canada
• Europe
  • Germany (Largest and Fastest-Growing Country Market)
  • U.K.
  • France
  • Italy
  • Spain
  • Rest of Europe
• Asia-Pacific (APAC) (Fastest-Growing Market)
  • China (Largest Country Market)
  • Japan
  • India (Fastest-Growing Country Market)
  • South Korea
  • Australia
  • Rest of APAC
• Latin America (LATAM)
  • Brazil (Largest and Fastest-Growing Country Market)
  • Mexico
  • Rest of LATAM
• Middle East and Africa (MEA)
  • Saudi Arabia (Largest Country Market)
  • South Africa
  • U.A.E. (Fastest-Growing Country)
  • Rest of MEA

Market Nature - Fragmented

• The market has a high degree of fragmentation because of the presence of many domestic and international players.
• The companies are focusing on mergers, collaborations, and acquisitions to increase their market shares.

Tokenization Industry News

• In April 2023, Fortanix collaborated with Imperva WAF to guarantee that the cryptographic keys responsible for securing TLS connections are safeguarded and managed in accordance with the standards and regulations outlined in PCI-DSS, Schrems II, and HIPAA.
• In January 2023, Marqeta revealed its Web Push Provisioning solutions, marking an expansion of its capabilities in payment card tokenization. Marqeta's new product enables companies to explore new use cases and streamline the onboarding process. It allows users to swiftly tokenize a card into a mobile wallet without the need to download a third-party application, facilitating faster and more convenient access.