Ecosystem Players Carving out Positive Path toward Biometric Smart Card Success

ABI Research recently published its latest edition of the Payment and Banking Card Technologies (MD- PBSC-22) Market Data and Payment and Banking Card Technologies (PT-2195) Technological Analysis Report, a biannual publication. The data base contains detailed information regarding the traditional contact and contactless payment cards market and provides an analysis of next-generation form factors, most notably the rising biometric payment cards opportunity.

This ABI Insight will provide a top-level overview of the traditional payment cards market as it relates to market volumes, trends, and likely future outcomes, concluding with some top-level thoughts and analysis related to the notable shift in vendor strategies toward the new innovative biometric smart card form factor.

• Full-year 2018 EMV card issuance landed at just over the three billion range, up approximately 6.8% Year-over-Year (YoY).
• Despite a particularly poor first half, and thanks to continued Europay, Mastercard, and Visa (EMV) migration progression in India and a return to growth levels in the United States (on top of significant activities within contactless migration), 2018 was a positive growth year, and good levels of market growth will be sustained over the next three to five years.
• Overall growth for 2018 was primarily driven by reissuance programs in the United States for 2H 2018 and the Middle East (ME) and Commonwealth of Independent States (CIS) regions.
• Contactless migration continues its upward trajectory, with 50% of all cards issued in 2018 having been of the contactless variety, which was the first time that milestone was reached.
• Much attention is being paid to contactless migration--viewed as the solution to help stem Average Selling Price (ASP) erosion via the move to the higher value proposition and an area--from a penetration standpoint, and is expected to continue growing, particularly in the United States, India, Southeast Asia, and Latin America. ABI Research forecasts that more than 77% of all cards issued in 2024 will be contactless-enabled.
• With over 50% of all EMV cards being issued into a combination of China, the United States, and India, focus remains on these three countries, as the ramifications of small fluctuations in their market conditions can have a significant impact on the global picture.
• The year 2019 also set a new record for the number of cards delivered into the United States; previously, in 2015, card issuance reached a staggering 640 million units.
• Despite more than 840 million units being issued annually, the Chinese market continues to settle, and the main variable continues to be cards that have no pre-defined expiration, alongside a significant shift in the way people pay.
• India’s success was aided by the reissuance of the Pradhan Mantri Jan Shan Yojana (PMJDY) card, which is considered a one-shot project and could result in a market decline in 2019 in addition to a strategy of taking inactive cards out of circulation, creating a market with less replacement opportunity.
• The remaining EMV migration opportunity remains limited, with only a handful of countries left to migrate and Indonesia and Vietnam considered the two most significant growth opportunities remaining within a forecast period ending in 2024.

The above dynamics will likely translate into a future market capable of YoY growth in the 2-4% range. Although growing, the rate is slowing and long gone are the days when EMV migration programs translated into double digit YoY growth rates. As a subsequent result, ecosystem players are looking toward the development of new innovative card form factors in order to draw out future market value and look toward markets in which large levels of growth are feasible, with one of the most notable today being that of the biometric smart card.

The biometric smart card ecosystem continues to develop and expand, with multiple players looking toward the integration of a biometric sensor into a card form factor as a primary driver toward the next generation of market growth. Notable vendors include Gemalto, IDEMIA, Giesecke+Devrient (G+D), IDEX Biometrics, Next Biometrics, FPC, MeReal Biometrics, Kona, Tactilis, Zwipe, Golpac, XH Smart, Feitian Technologies, Huada Electronic Design Co. (HED), Silicon Card Tech, and SmartMetric, to name but a few, with the list of active vendors expanding.

This year, several significant biometric smart card market milestones were reached, marking the first signs of market positivity:

1. The first large-scale sensor order was announced by Fingerprint Card in partnership with Gemalto on February 21, 2019 for the first volume order of fingerprint sensors for contactless biometric payment cards, consisting of the supply of a few hundred thousand units over a 12 to 24-month period.
2. IDEX Biometrics announced several commercial opportunities, most notably a multimillion dollar-commitment from a leading Information Technology (IT) supplier for its flexible biometric sensors.
3. Next Biometrics announced that it had supplied 30,000 of its flexible sensors to Tactilis.

The market is moving in the right direction, and vendors are beginning to focus market position and partnerships on certain regions and cementing strategic partnerships in order to address mass production and cost down efforts. Certification for mass deployments is now expected in late 2019, early 2020, and most vendors have now marked 2020 to 2021 as the year in which significant mass volumes will begin to be deployed.

Today, pilots are continuing, and some are expected to reach completion at the end of 2019 or early 2020. Pilots take several months to execute, and are then typically followed by evaluation processes at a similar time scale; pilots that took place in 2018 and 1H 2019 are those likely to scale in 2021.

Ecosystems continue to be forged and strategic partnerships continue to be announced, making 2019 a notable year for the biometric smart card. Vendors are strategically targeting certain regions and partnering with other vendors that can aid in ramping up production and ultimately help reduce production costs, with ecosystem players targeting a card price point of sub-US$10 over the next three to five years.

The market is looking extremely positive. Ecosystem players are forging ahead with technology developments related to card products, enrollment solutions, certification, and cost-down strategies as pilots continue and finalize, which will result in first-level issuance ramping, moving from the supply of hundreds of thousand toward the million mark as early as 2020 or 2021.