Market Trends of Tokenization Solution Industry
BFSI to hold the largest market size
- Banking, financial, and insurance institutions are privy to sensitive data from internal and third-party sources. Hence, adopting Tokenization is expected to be more prominent and frequent in the BFSI sector, as it provides security for sensitive data, which is prone to risk during card or online transactions.
- The other benefit of tokenization solutions, primarily resulting in growing adoption for banks, is the significant reduction of fraud losses related to PAN compromise. Reduced card and payment fraud also mean fewer disputes. Furthermore, banks can set accurate risk ratios and limits and authorize high-value transactions for genuine customers. These advantages are more difficult to achieve with a traditional PAN-based solution. Hence, a thriving market for tokenization solutions.
- Adopting tokenization solutions has also reduced the number of card fraud cases in banks. Besides, it also brings flexibility, effectiveness, security, and a low-cost model to the BFSI sector. Reduction in fraud cases would increase the revenue of the BFSI industry globally, which is estimated to drive the market for Tokenization solutions further.
- Due to the digitization and data analytics integration, the Insurance industry is on the verge of a seismic, tech-driven shift. Tokenization solutions are helping insurance companies in customer data protection and secure payment of premiums and their analysis. It is also assisting in reducing fraud cases and the transformation of insurance companies' model of "detect and repair" to "predict and prevent."
- Futhermore, in May 2023, Visa, a firm that provides card payments, has introduced a feature that, if the card has been tokenized, enables customers to conduct online transactions without having to enter the cardholder verification value (CVV). The CVV-free function, which was introduced in India, aims to simplify online transactions. Those businesses that use it won't need to ask clients for their CVV each time they do a domestic transaction. This three-digit number on the back of the card will only be verified once, during the tokenization process.
- The increasing usage of blockchain in financial applications such as cryptocurrencies and NFTs will drive Tokenization in the studied period. For instance, the total value of sales involving non-fungible tokens (NFTs) in the art area fluctuated wildly between April 15, 2022, and April 2023.
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North America is Expected to Hold Significant Market Share
- North America is the dominating region in the tokenization solution market, owing to the earliest adoption of advanced technology in the payment gateway industry. Most tokenization solution vendors are American based, accounting for the major portion of the revenue of the tokenization solution market.
- North America is a highly regulated region, with the regulations like a surge in cyber attacks, generally fraud of payments, and CCPA across the industry. It is expected that the need for tokenization will grow in this region. Customers' preferences are also changing; their inclination toward digital credit cards and contactless payments is expected to fuel the tokenization market growth.
- The factors that are also intending the North American tokenization market growth are increasing usage of smartphones, E-Commerce, and services like online gaming, online streaming, and government services. The government is also taking initiatives to improve cyber security and online transactions because online shopping or transactions are increasing the chances of cyber threats.
- The adoption of cloud technology is highest in the region, a vital reason for the growing adoption of tokenization solutions. The region is also the home of all the major e-commerce major companies, where the adoption of tokenization solutions is highest.
- The significant growth of the retail and e-commerce industry in the region is further estimated to grow the tokenization solution market. The BFSI sector has also shown healthy growth in the region. The highest adoption of blockchain technology in the region is estimated to further expand the tokenization solution market significantly.
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