Scanning the Biometric Payment Card Frontier before Becoming a Pioneer

Author: Sam Gazeley

Although the COVID-19 pandemic put a hold on biometrics payment card projects in 2020 and 2021, the industry has proven to be resilient. Numerous partnerships have formed and each one signals the intention of an eventual commercial launch. With contactless payment cards accounting for 82% of all cards issued this year, biometrics is the next step in payment solutions, as it provides a convenient, safer, and more secure way to transact. Navigating these uncharted waters will require banks, card vendors, financial institutions, and other industry players to take a step back and scope the horizon.

The Biometrics Payment Card Market Is Just Beginning

At the moment, the biometrics payment card market is in its infancy as it’s in the pilot/Proof of Concept (PoC) growth stage. Between the COVID-19 pandemic and the global chipset shortage, projects took a hit, with some pilots and/or commercial launches being pushed back 6 to 9 months. As of the time of writing our Biometric Payment Card Developments, Projects and Market Opportunities research report, there have only been five commercial launches worldwide—two in France, two in Morocco, and one in Sweden. The industry is seeing countless alliances being struck between Europay, Mastercard, Visa (EMV) card vendors and payment card issuers.

Education Is in Order for Smart Card Players

For companies that want to issue biometric payment technology, there is still a great need for education. More specifically, they need help understanding who the target audience should be, how they can market their product, and when the optimal time for raising awareness is. The industry is still just starting out and early commercial launches will undoubtedly serve as valuable learning lessons for other smart card issuers.

Moreover, the industry must brainstorm ways to showcase the excellent security associated with biometric payment technology. While mobile wallets are well-received by consumers, biometrics is another story. For example, a recent Global Passenger Survey from the International Air Transport Association (IATA) found that 56% of travelers have concerns about data breaches when using biometrics. And more than half of the respondents indicated they want transparency on with whom their data are shared and how they’re used/processed. One possible solution to ease consumers’ minds is to use biometric sensors to bridge the gap in perceived security between mobile devices and a card.

Shifting the Business Model for Biometrics Payments

One of the earliest commercial launches of biometric payment cards came from the French international banking group BNP Paribas. The project serves as an important case study with implications on the evolving issuer business model. BNP Paribas’ customers proved that there is indeed a willingness on behalf of banking customers to purchase biometrics cards, even if it costs them. The company has exemplified that issuers can pass the cost of the card onto the consumer, as premium account holders pay a €24 annual fee.

The launch from BNP Paribas also gives card issuers an idea of what penetration rate they can expect. Out of 10 million retail banking customers, 100,000 to 150,000 of them ordered a biometric card. As long as issuers launch in a similar manner to BNP Paribas (aggressive marketing and premium exclusivity), then they can expect a 1% to 1.5% penetration rate of their customer base.

Eventually, card issuers will shift their business models to make biometrics payment technologies available to standard account holders. What’s more, the Average Selling Price (ASP) for biometrics payment cards will naturally go down as the technology evolves and architectures become more simplified. To hit mass adoption, prices must get to at least sub-US$10. Based on the price reductions the market has experienced in recent years, this milestone is expected to be reached as soon as 2025 to 2026. And a sub-US$5 ASP could be reached as early as 2027 to 2028.

Companies that develop biometric payment cards should now research ways to further reduce costs—by identifying the components and processes that inflate the margin and finding new methods that keep costs minimized. After all, issuers want a competitive market filled with ample options.

The United States Is Slow to Adopting Biometrics Payment Cards

As it stands, Europe and Asia-Pacific are the leaders in the biometrics payment cards market, with France leaps and bounds ahead of any individual country. Latin America and the Middle East & Africa will be smaller market opportunities, while the technology is virtually non-existent in the United States. The reason for this is due to the chip-and-sign authentication user experience commonly used in the United States, as opposed to a chip-and-PIN card authentication.

ABI Research expects significant growth in biometric payment card issuance in Europe and Asia-Pacific by 2024—when nearly 8 million units will be shipped between the two regions in our more conservative of two market forecasts. In our more aggressive forecast, that number would be around 55 million shipments in 2024.  By comparison, North America will ship just 20,000 units that year. In a more aggressive forecast, 180,000 biometric payment cards would ship to North America in 2024. This trend is not unlike the hesitancy of the United States to migrate to EMV and contactless smart cards.

Notable Projects from Biometric Payment Companies and Issuers

More than 20 biometrics payment card pilots are underway at the time of writing this post, with Tier One vendors like Zwipe, IDEX Biometrics, and Fingerprint Cards dominating the market. Biometric payment card companies and their customers (banks and financial institutions) have been busy in the last couple of years, including the following activity:

  • FPC’s T-Shape sensor module for biometric cards has been granted certification in line with Mastercard specifications. During the testing, the sensor successfully demonstrated the ability to detect any attempt to use fraudulent fingerprint credentials, a key concern in contactless payments.
  • Visa certified the Zwipe Pay Platform in March 2022.
  • Vopy, a provider of embedded financial services for telecoms and financial institutions, selected the Zwipe Pay ONE Platform for manufacturing; 100,000 payment cards were issued in 2021 and 500,000 are planned for 2022.
  • FPC and Tokyo-based electronics company MoriX partnered to bring Mastercard biometrics payment cards to the Japanese market.
  • FinTech Fiserv, Mastercard, Thales, and FPC recently joined forces to develop a smart card with biometrics authentication for customers of Poland-based Bank Pocztowy.
  • Biometric payment card companies like Zwipe and FPC have partnered with banks in Iraq, Qatar, Morocco, India, and Mexico.

Strategic Suggestions

The biometric payment card market is at an exciting stage, as numerous pilots are in progress and more commercial launches are on the way using the technology. However, there are still a handful of decisions to be made by industry players, such as how the cards will be issued, how customers will be enrolled, in what way can brand differentiation be maintained, and to what extent will transaction limits affect the demand for biometrics payment cards.

For biometric card companies, interest in your products will continue to grow, even from fintech and neo banks. But the United States, typically a huge market, should be viewed as a long-term opportunity right now. A key difference maker in the trajectory of the market will be the ability of vendors to keep manufacturing costs down. Until now, the market has been nascent due to the high costs associated with biometrics payment technology, which are passed down to the consumer. When the ASP reaches sub-US$10, the industry is on the path to mass adoption, as even the casual banking customer can see the perceived value of enhanced security and convenience at a similar price as traditional contactless payment cards.

 

To learn all the latest trends surrounding the biometric payment card market and how industry players should plan ahead, get our latest report.