Protecting payment data is integral to the security of the digital payments ecosystem. In an increasingly interconnected world, with a growing number of payment options, the need for strong security solutions is clear.
With so many payment methods now in use, the need to ensure that consumer data is protected across all channels is growing. One of the core concerns for many forms of data protection is Payment Card Industry Data Security Standards compliance.
Network Tokenization is a technology that replaces payment card data with a network-issued token and unique transaction cryptograms. The technology reduces the potential for fraud, improves the merchant and consumer experience, increases approval rates, and reduces overall transaction costs.
Network Tokenization Market Development
According to the latest worldwide market study by Juniper Research, they forecast substantial growth of 190 percent in network-tokenized transactions -- reaching 400 billion globally in 2028, that's up from 140.3 billion in 2023.
These transactions include online and desktop eCommerce transactions, mobile payments and Internet of Things (IoT) transactions.
The market study found that network tokenization, the process of replacing card payment data with unique network-issued tokens, is able to balance security and friction more effectively than other solutions -- a key concern within the eCommerce market.
According to the Juniper analyst assessment, the repeated usability of network tokens reduces the instances a consumer is required to provide payment details, thereby promoting limited friction.
Juniper's analyst also anticipates a surge in network tokenization mandates, following successful market implementations. Moreover, financial service providers and fintech companies will need to comply.
A good example of this scenario is the Reserve Bank of India, which now requires tokenization for all credit and debit cards used for online transactions from October 2022.
"As the number of transactions and payment methods within eCommerce continues to increase, it is important for governing bodies to take action through implementing regulations and mandates," said Cara Malone, industry analyst at Juniper Research.
Furthermore, these new mandates will represent an important opportunity for network tokenization vendors to grow their revenue.
Outlook for Network Tokenization Applications Growth
As economic uncertainty continues to prevail across the globe, this creates an increase in fraudulent activity. It is vital to have robust network tokenization in place in order to increase security to combat the ease of fraudulent activity.
Juniper analysts believe it is important for businesses to retain as many consumers as possible during this economic uncertainty, in order to gain as much revenue as possible.
That said, I expect it's likely for businesses such as eCommerce vendors to consider network tokenization to keep a valued customer, through a decrease in false declines, and for the overall improvement in smooth payment processing.