Next-Generation Powered Payment Cards, Part 1

Subscribe To Download This Insight

By Phil Sealy | 4Q 2017 | IN-4761

Next-generation powered payment cards have been in the market periphery for a number of years, largely remaining in a dormant phase as vendors continued to research, develop, and ultimately define and understand the potential customer base for some of the powered card form factors, including dynamic code verification (DCV) and biometric sensor cards. Today, there are a number of next-generation powered payment card pilots in place, marking the beginning of the exploratory and testing phase by issuers. The most prominent trial for the biometric sensor card is currently taking place in South Africa, led by MasterCard, issued by Absa Bank for use at Pick n Pay, a large South African retailer. This insight looks specifically into the biometric sensor cards market, outlining some of the market challenges arguably standing in its way, while also providing ABI Research’s issuance expectations.

Registered users can unlock up to five pieces of premium content each month.

Log in or register to unlock this Insight.

 

The Biometric Sensor Card

NEWS


Next-generation powered payment cards have been in the market periphery for a number of years, largely remaining in a dormant phase as vendors continued to research, develop, and ultimately define and understand the potential customer base for some of the powered card form factors, including dynamic code verification (DCV) and biometric sensor cards. Today, there are a number of next-generation powered payment card pilots in place, marking the beginning of the exploratory and testing phase by issuers. The most prominent trial for the biometric sensor card is currently taking place in South Africa, led by MasterCard, issued by Absa Bankfor use at Pick n Pay, a large South African retailer. This insight looks specifically into the biometric sensor cards market, outlining some of the market challenges arguably standing in its way, while also providing ABI Research’s issuance expectations.

Many Drivers, but Many Challenge Still to Be Addressed

IMPACT


Biometric Sensor Card Drivers
  • Can be used with existing POS infrastructure.
  • No requirement to remember PIN.
  • Provides proof of life, which can be leveraged to help mitigate social/welfare fraud.
  • Remote enrollment possible for added convenience.
  • Biometric sensor cards could be the trusted authentication technology used to relax current contactless spending limits.
  • Consumers now have a better understanding and are becoming increasingly more comfortable with biometric technology, largely driven by mobile payments, most notably through Apple and Samsung Pay, which in turn will proliferate many new use cases. 
Biometric Sensor Card Inhibitors
  • Much higher price point with ASPs (in some instances) above the US$20 mark, significantly more than the US$1 to US$2 price point of a traditional dual interface payment card.
  • Energy harvesting complexities and possible limitations with certain POS solutions, including mPOS, unable to draw the required power.
  • Dependency on enrollment process could be complex, time consuming, and require physical face-to-face enrollment. 
  • Biometric sensor cards are designed to address CP fraud, whereas reducing CNP fraud is a higher priority for most issuers.
 

ABI Research’s Expectations: Where Should Product Focus Be Placed?

COMMENTARY


In the short term, ABI Research expects issuance levels of biometric sensor cards to remain at low levels, as trials and evaluation continues on the global stage. It is feasible that near 1 million units could ship globally in 2018, but more significant volumes will not be achieved until 18 to 30 months after successful trial completion. ABI Research believes that biometric sensor card issuance will remain below the 100 million mark over the next 5 years. To put it bluntly, the associated ASPs are far too high, requiring a target price of around US$5 in order to gain significant interest and support from issuing banks and financial institutions.

The North American payments market may be one for the distant future, hindered by the United States, which is still in the process of EMV migration. All focus in North America from a biometric sensor card issuance perspective, in the short term, will likely stem from Canada. The United States will first complete EMV migration and then turn its priorities to contactless migration, placing next-generation payment card adoption further down its priority list. However, there is still scope for success in the United States, initially likely to reside in high-end access control use cases for enterprise and government.

As a whole, Europe tends to be more coy on biometric sensor card adoption and will likely focus efforts on the DCV form factor to help combat rising CNP fraud rates. The Latin American payment cards market continues to struggle. The two primary markets, Brazil and Mexico, are unlikely to move to a higher value proposition in the short term, challenged by negative macroeconomic conditions. The Asian region presents a good mix of well-established payment markets, including Japan and Korea, with emerging and growing countries where government-run social/welfare applications and payments are intertwined, including China and India.

Overall, the payment cards market may be considered the Holy Grail from a volume perspective, but the biometric sensor card is more than a payment authentication technology. Early adoption of biometric sensor cards will likely proliferate in the MEA region, driven by social security/welfare applications in a bid to help combat associated fraud, using biometrics as the additional security platform to ensure proof of life. Until the target price or the significant lowering of ASPs can be achieved, emphasis should be placed on applications and end markets like social/welfare where an ROI is evident and higher ASPs can be commanded. During the next 3 to 5 years, ABI Research believes that applications including access control, social/welfare, healthcare, and VIP hospitality applications will be the successful end markets for biometric sensor cards, offering a real-life test best for eventual entrance into the pure payments market.

This insight provides a snapshot into ABI Research’s recently released Next-Generation Powered Payment Cards report, which also includes analysis of DVC cards, business models and end other market opportunities.

Services

Companies Mentioned