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Increasing Financial Fraud in Ecommerce is Expected to Drive the Growth of the Tokenization Market

   January 4, 2023

The explosive growth of eCommerce is increasing the demand for secure payment solutions. Merchants witnessed a rise in payment fraud from $17.5 billion in 2020 to over $20 billion in 2021, a yearly growth of 18%. As commerce shifted from physical stores to online and away from cash and physical cards, there was an increase in fraudulent activities. According to Cryptomathic, in November 2019, the volume of credit card decline was extremely high in eCommerce and posed severe penalties from the payment network to merchants. Around $8.6 billion worth of CNP transactions were declined per year by the U.S. merchants, but the fraud prevented in eCommerce accounted for only $6.5 billion (CNP transactions). This indicates a false decline volume of about $2.1 billion per year for U.S. eCommerce.

eCommerce continues to grow and evolve, and so does eCommerce fraud. Tokenization has been found to be a reliable solution in the eCommerce business. For instance, mobile devices are more convenient and easier to use for payments nowadays than computers and other tech solutions. Tokenization needs to ensure mobile payments so that cards can be used for transactions without exposing the original information on the cards. eCommerce organizations implement tokenization within mobile applications to collect sensitive data from their customers while maintaining ultimate privacy and safety. Thus, the need for modern fraud management solutions is expected to provide growth opportunities for the tokenization market.

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