Second-Generation Biometric Payment Cards to Help Kick-Start the Market

The biometric payment card continues on its positive market pathway. Pilots are active globally, with the card form factor pitched as the next generation of payment card to help address contactless authentication in order to provide a future contactless payments experience without limits.

Fast forward to today, and it remains clear that ecosystem players are working toward a common goal, in terms of readying for mass production and significant volume orders. Although the biometric payment card market largely remains in the pilot phase, significant efforts are being undertaken across the entire value chain, in developing next-generation products and architectures to help reduce card manufacturing complexities and reduce components, with the ultimate goal of achieving a significant Average Selling Price (ASP) reduction to help kick-start the market.

The COVID-19 pandemic has had a two-pronged impact on the biometric payment card market. First and foremost, the COVID-19 pandemic resulted in many market delays related to biometric card pilots. Prior to COVID-19, particularly during November 2019, December 2019, and January 2020, the market trajectory for the biometric payment card market was extremely positive, with significant regional partnerships forged and card certification beginning to take shape. The market looked set for a positive 2020 and all ecosystem expectations were that the market would begin to move, with more pilots in the pipeline, alongside several commercial launches expected after pilot completion.

However, due to COVID-19-related economic pressures, largely driven by country-wide lockdowns, banks, financial institutions, and issuers all began to take more conservative approaches to innovation and Research and Development (R&D) spending; in many instances, resulting in planned pilots being postponed and/or delayed. Overall, we can consider that COVID-19 has negatively impacted the biometric payment cards market, not because of a lack of market desire or interest, but because of a shift in mindset from leading issuers, moving away from innovation, toward emergency management to combat the pandemic, which shifted budgets and priorities.

On the flip side, COVID-19 has created an acceleration effect related to contactless adoption and migration, particularly in countries that had already begun contactless migration plans or considered contactless mature. With citizens looking to avoid physical contact with devices and things that are communal in nature, such as the Point of Sale (POS) terminal, contactless is viewed as a technology that can help limit physical interactions at the POS. The increased use of contactless was not just pushed from an issuer’s perspective, but by myriad actors, including merchants, who continue to look and promote contactless payments over chip and Personal Identification Number (PIN) or cash, to help protect their customer base and their employees. The payment networks helped support the increase in the maximum contactless payment transaction limit in more than 100 countries globally and even the World Health Organization (WHO) actively supported and promoted the use of contactless to help stem the spread of COVID-19.

The contactless acceleration aspect of the market is extremely important to the future success of the biometric payment card, with the contactless card market considered the primary Total Addressable Market (TAM) for the biometric payment card. COVID-19 has had an overarching negative impact on the biometric payment card, although this has been offset, thanks to the emphasis being placed on contactless payments.

Second-generation biometric payment card products are well along in development, with the primary goal of reducing the complexities of the card, simplifying the manufacturing process, and reducing the Bill of Materials (BOM), while enabling the use of existing manufacturing and personalization equipment already in the field. The overarching goal is to significantly reduce card cost and the development work done related to next-generation development today, which will ultimately define how the market progresses over the next 12 to 24 months.

Next-generation biometric payment card products will likely reduce the cost per unit to the US$13 to US$20 range per card, depending on volumes, which would be a significant market milestone, considering the US$25 to US$30 price point today.

Currently, the market is moving in two developmental directions, although both moving away from discrete components or distributed component architectures toward integrated solutions. This is being achieved thanks to two primary market developments: 1) the system on package approach, integrating some of the componentry into an Application-Specific Integrated Circuit (ASIC) to reduce the number of components required to be mounted on an inlay; or 2) via a single silicon approach whereby an inlay can be manufactured without the requirement to mount other components, with the inlay consisting of a single chip and sensor.

The removal of components and combining of functions, such as the development of Biometric System-on-Card (BSoC) architectures, without reducing performance and power harvesting capabilities is a complex agenda, but a challenge that has been accepted by the entire ecosystem. This is a common industry goal/agenda to help “kick-start” the market. Most second-generation products and/or the components required will begin sampling during the back-end of 2020/the beginning of 2021, meaning a ramp up will be possible in 2021, and the product development work completed during the COVID-19 will set a positive market tone for 2021.