Next-Generation Powered Payment Cards: Part 2

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By Phil Sealy | 4Q 2017 | IN-4774

This second edition of our ABI Insight coverage of next-generation powered payment cards will take a closer look into the dynamic card verification (DCV) card variant, outlining some of the market challenges and drivers as well as providing commentary pertaining to ABI Research’s forecast expectations.

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The DCV Card

NEWS


This second edition of our ABI Insight coverage of next-generation powered payment cards will take a closer look into the dynamic card verification (DCV) card variant, outlining some of the market challenges and drivers as well as providing commentary pertaining to ABI Research’s forecast expectations. 

DCV Card Drivers and Inhibitors

IMPACT


DCV Card Drivers

  • No change to consumer behavior required for dynamic card verification use cases
  • Designed to address a specific problem to help mitigate and reduce the rising rates of CNP fraud
  • Typically makes use of non-rechargeable battery, lasting in conjunction with traditional card expiration
  • Being pushed by the major payment networks: Mastercard via dCVV and Visa via dCVC

DCV Card Inhibitors

  • CNP fraud is difficult to measure. Banks and financial institutions have to better understand their client base, where end users shop, travel, and spend to help better pinpoint fraud and, thus, pinpoint where DCV may be most appropriately deployed to maximize the ROI.
  • Additional cost is a factor. Today, display cards command an ASP in the US$10 to US$15 range. In addition, an ongoing subscription fee is required for access to the synchronized servers with algorithm and rule functions, which is typically provided by the card manufacturer.
  • Heavy investments have already been made into e-commerce security applications, including 3D secure. ROI on 3D secure may be required before reinvesting in new next-generation technology.

ABI Research’s Regional DCV Card Expectations

COMMENTARY


Driven by Gemalto and IDEMIA, previously OT-Morpho, it should come as no surprise that France is currently leading the way in DCV trials/pilots and Europe as a whole will likely adopt and move to DVC first. Successful trials in France will likely proliferate in pilots in other mature payment markets, including the United Kingdom, Germany, Spain, and Italy, with the European region becoming the test bed and real-life case study for other regions to monitor.

North America will likely lag behind in terms of DCV card adoption, with near-term activity limited to Canada as the United States continues to focus efforts on EMV migration. However, looking further forward, North America may favor adoption of the DCV next-generation card variant over the biometric sensor cards; the United States and Canada are largely against biometric capture and storage (although mobile applications may have somewhat eased resistance). But as a whole, citizens may feel uneasy giving or allowing a bank to secure their biometric data.

There will be little appetite in emerging regions, which are still fleshing out and expanding e-commerce availability and capabilities, although they may look toward DCV cards once more established on the e-commerce stage, using them as a platform from which to combat rising CNP fraud rates. It is ABI Research’s opinion that the DCV card is a technology designed for mature and established payment markets, where e-commerce and thus CNP digital transactions are a part of everyday life. ABI Research believes that initial issuance will reside in Western Europe and a select number of Asian countries, including Australia, South Korea, and Japan.

DCV cards have a specific payment-focused use case and are designed to solve a specific problem (that of increasing CNP fraud). Therefore, ABI Research believes that DCV cards will be the most popular next-generation powered payment card issued by 2022. In addition, DCV cards are lower cost than other powered card variants, including the biometric sensor card, with a price point of between US$10 to US$15 per unit. Issuers will be able to calculate an ROI far easier, due to the DCV card’s specific use case, to help combat CNP fraud rates, and thus justify investment into the higher-end DCV card proposition.

This ABI Insight provides a snapshot into the recently released ABI Research report Next-Generation Powered Payment Card Technologies (AN-2774), which also includes analysis of biometric sensor cards, next-generation powered payment card business models, and other end-market opportunities.

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