Tokenization Market Insights Emphasize Need for Scalable Security -

The global tokenization market was valued at USD 2.03 billion in 2021 and is projected to grow at a compound annual growth rate (CAGR) of 24.09% from 2022 to 2030. The market’s growth is driven by the increasing adoption of digital processes and the digital management of sensitive data. The surge in both simple and complex digital payments has further accelerated industry growth. Technological innovations have enabled the development of advanced data security solutions, which have significantly contributed to the market expansion. The growth of the market is closely tied to technological advancements, which occur in tandem. During the early days of the COVID-19 pandemic, most industries experienced temporary disruptions or shutdowns. Following the global lockdown, companies began digitizing their operations to prevent delays and disruptions. This transition involved frequent handling of highly sensitive consumer data, and tokenization technology emerged as a critical tool for ensuring the security of such data while companies rapidly digitized their services. Consequently, the market expanded during this unprecedented period due to the increased demand for digital payments.

Tokenization technology is predominantly utilized in the information technology, banking, financial services, and insurance sectors. It has played a pivotal role in enhancing the digital payment infrastructure and services of banks and payment applications worldwide. For example, in December 2021, PhonePe, a mobile payment app, introduced tokenization to its platform and began deleting all card-on-file details in compliance with a new Reserve Bank of India regulation. This technology has carved out a substantial and demanding market by offering significant data security benefits. Regardless of industry type, every company handling sensitive data is eager to incorporate tokenization into their processes, thereby driving overall market growth.

Component Insights

The solution component segment dominated the market, accounting for more than 80% of the total revenue in 2021, and is expected to maintain its leadership during the forecast period. As industries continue moving toward full digitization, data security becomes essential, making the solutions component vital for companies that require fast, reliable data protection solutions. The segment also aids industries in complying with regulations set by regulatory bodies. The solution component plays a key role in advancing data security across various sectors.

Application Area Insights

The payment security segment led the market, accounting for over 30% of total revenue in 2021, and is expected to retain its dominance during the forecast period. The rapid growth of digital payments has driven banks and payment app developers to integrate tokenization to safeguard sensitive consumer data. The increase in QR-code-based payments post-pandemic has made tokenization a crucial tool, allowing users to complete secure, fast transactions without the risk of exposing card details. This solution enhances the security and efficiency of payment applications.

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Technology Insights

The application programming interface (API)-based segment represented more than 55% of the market share in 2021 and is anticipated to continue leading the market in the coming years. API-based technology underpins tokenization by operating behind the scenes to provide data security. This segment offers a variety of data security solutions, from basic to advanced levels, for digital processes. The combination of API technology and encryption facilitates secure global access to digital services.

Deployment Insights

The on-premises deployment segment captured over 60% of the revenue share in 2021. This deployment model is preferred because the entire tokenization process takes place on the device itself, meaning no data, including tokens, is transmitted externally. This approach is especially popular for portable devices such as mobile phones.

Industry Vertical Insights

The banking, financial services, and insurance (BFSI) sector represented more than 20% of the market share in 2021. Companies in this sector handle highly sensitive data across their service offerings, investing heavily in data protection to prevent breaches. The increasing volume of digital payments and financial services has led to a growing reliance on tokenization in the BFSI industry.

Regional Insights

North America led the market with a share of over 35% in 2021. The region has seen rapid adoption of digital technologies, with most consumers in the U.S. using some form of online payment. Market trends such as the rise of buy-now-pay-later services for cryptocurrencies further drive the growth of tokenization in North America. Additionally, major payment networks like Visa and MasterCard, which are headquartered in the U.S., play a pivotal role in facilitating online transactions, boosting the market.