Tokenization Market - Snapshot
Tokenization is a data security system which converts sensitive data into a unique ID, referred to as token, to avoid unauthorized access to sensitive information. This process then preserves all the information in a format that allows the information’s security not to be compromised. Tokenization is beneficial for enterprises as it makes it difficult for individuals to hack the system or breach security, to gain access to user data. The advantages of tokenization include the ability to secure sensitive data, reduced data loss, reduced payment card industry data security standard (PCI-DSS) compliance scope, compatibility with other technologies, and overall internal protection. The tokenization market is forecasted to grow to US$ 6,901.1 Mn by 2026, recording a CAGR of 18.6%.
The major factor responsible for growth of the tokenization market is rising data security concerns in all the data sensitive companies around the world. The tokenization market has experienced considerable growth due to large number of financial firms opting for increasing security in payment processing systems. With increasing credit card fraudulent activities, there is a rise in demand for payment security. Tokenization is often used for credit card processing. The payment card industry (PCI) council describes tokenization as a method in which the primary account number (PAN) is substituted with a surrogate/alternate value called a token.
The tokenization market is driven by the increase in cyberattacks and data breaches. This in turn is boosting the tokenization sector globally. For instance, in May 2017, cyberattacks by the WannaCry ransomware struck several banks, financial institutions, and hospitals. More than 200,000 computers around the world were hacked due to these attacks. Many such cyberattacks have raised concerns about data security. Moreover, they have boosted the demand for security solutions (such as tokenization) even in small and medium enterprises (SMEs). The global tokenization market is anticipated to grow significantly during the forecast period, attributed to rapidly growing demand for market surveillance.
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However, high cost of implementation and upgrade of hardware required for tokenization is expected to be one of the major restraints pulling back the market growth. The cost of hardware (storage and security), software (synchronization & replication), and technical support required to maintain in-house tokenization is a major concern for organizations, particularly small- and medium-sized organizations and enterprises.
The tokenization market is segmented on the basis of components, solution, enterprise size, and end-use. Based on components, the market has been segmented into hardware, software (on- premise, cloud) and services (managed/outsourced services, professional services). Based on solution, the market has been segmented into payment security, customer data management, compliance & policy management, omni-channel management, and encryption. Payment security solution held the major share in 2016 in the overall tokenization market.
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However, compliance & policy management, and omni-channel management are expected to display comparatively fast growth during the forecast period. On the basis of enterprise size, the market has been divided as small & medium enterprise and large enterprise. In terms of end-use, the market has been bifurcated into BFSI, retail & consumer goods, government, education, military & defense, automotive, IT & telecom, energy & utilities, manufacturing, and others (hospitality & transportation).
From a geographical standpoint, North America is expected to hold a major share in the tokenization market. Growth in this region is attributed to strong adoption and penetration of tokenization software, hardware and services, as well as considerable application of tokenization in different end-user segments across the region. Asia Pacific region is expected to witness lucrative growth due to rising adoption of such software in India, Japan, Philippines, and Singapore. Furthermore, the markets in Middle East & Africa (MEA) and South America are also expected to grow significantly during the forecast period.
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Tokenization Market Reaps Consistent Revenues from Payment Card Industry
Tokenization is gathering momentum for protecting sensitive data, usually text data, in financial and banking services businesses. The credit card industry has made giant strides, on the back of aggressive marketing and transformation in the spending habits of people. Tokenization is viewed as a type of encryption, usually easier to implement than the latter. Efforts by the credit card companies to achieve stringent compliance with PCI-DSS requirements is a key trend bolstering the expansion of the tokenization market. A number of algorithms have come to the fore that have propelled advances in the tokenization market. Concomitant advances have been made in the use of cryptographic algorithms in the banking sector. The sector itself has made rapid strides in the use of IT over the years, both in developed as well as emerging economies. Growing focus on combating credit card frauds and several other frauds have boosted the growth prospects in the tokenization market. Companies in the ecosystem are showing keen market demand for encryption techniques that can ease their data protection frameworks and also help build consumer trust. A few new approaches have come to the fore in relation to out of vocabulary (OOV) words.
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