The Biometric Smart Card—the Beginning of the End or a New Beginning?

Despite significant industry-wide investments in the development of the biometric payment card, the market is not anywhere near the level originally expected. Although all vendors want the biometric card to succeed, market adoption has been cumbersome and slow. This is paired with a notable tone change in the market, driven by an industry-wide realization that the biometric card will remain a niche within the payment cards market. In reaction there has been a strategy shift by some vendors looking to explore other end verticals, as they look to plug the gap and explore other growth areas, most notably access control and crypto cold wallets.

Regardless of possible market success and future market direction, the measure of success and expectations are being reevaluated. It is clear that biometric card volumes will not hit the billions of units and for some vendors; their survival is fully reliant on the success that has forced the strategy shift by some.

Originally developed over a decade ago with limited market success, to date, question marks around the future relevance of the technology are ripe. The payments market remains the volume golden goose, but a shift toward the targeting of other end markets is a watershed moment for the technology, either marking the beginning of the end or a new market beginning.

ABI Research has previously stated that the biometric payment card is not a product, but a solution. It is not as simple as migrating from a traditional contactless payment card to a biometric alternative, with requirements for enrollment and education. This adds a level of friction, and is a major factor holding back the technology. Overall, there are three main inhibitors: price, enrollment, and manufacturing complexities, which despite significant efforts to improve, have not moved at a level quick enough to translate into significant adoption:

• Price: The cost, in comparison to a standard contactless card, has been a constant discussion point and arguably one of the largest factors limiting its success, to date. Although significant development work has been undertaken to help reduce the cost (originally in the US$40 per unit range)  to somewhere between US$15 and US$20 today, it remains some 7X to 10X higher than a contactless payment card. Paired with this is pricing pressures and erosion, which reentered the overall payment cards market in 2024, after significant price increases post-COVID-19 and the chipset shortage. Contactless payment cards began to have success when they narrowed the gap to 2X the cost in comparison to contact cards, kickstarting the move from niche to mass appeal. A price point of approximately US$4 should be the goal for biometrics payment cards.
• Enrollment: Since inception, the development of enrollment solutions has continued as the market tries to find the best product(s) to ensure enrollment choice, ease of use, and scalability at a low cost. Permanent and disposal sleeves, alongside mobile Near Field Communication (NFC)-enabled solutions have been developed with a more recent focus on in-field enrollment. Despite these efforts, the enrollment side of the market has been hampered by a lack of standardization. New in-field enrollment solutions designed to allow end users to enroll fingerprints over a number of transactions remain in the pilot phase, building up a full profile of the fingerprint across several contactless transactions, harvesting the power from the Point of Sale (POS). The in-field enrollment approach is considered sustainable and cost effective, but it remains in an early testing phase, meaning further evaluation time will be required upon pilot completion.
• Manufacturing Complexities: There is no getting away from the fact that the biometric card is complex from a manufacturing point of view. Although significant efforts have been undertaken over the past 5 years to simplify and reduce componentry, it remains a significant undertaking to manufacture with multiple connections to the antenna to manage. This ties into the pricing issue, whereby high levels of manufacturing complexity impact yield in a negative way, in turn increasing wastage and impacting price.

From the beginning of 2024, there has been a clear refocus by some ecosystem players to begin exploring and targeting the access control market. Overall, vendors that are fully reliant on the success of the biometric smart card, are more aggressively pursuing the access control market, whereas vendors with broader smart card product portfolios typically remain focused on the payment cards market.

The access control market is considered to have strong alignment with the biometric card, able to improve security without the requirement to invest in new infrastructure. The convergence of logical and physical access also plays to the biometric card’s advantage.

However, the market for access control biometric cards can be described as one that remains in the exploration phase, whereby new partnerships and strategic alliances are being forged in a bid to build out ecosystems. In addition, ABI Research believes that the market will be further inhibited by slow decision-making processes among key players, driven by the requirement and need for agreement from multiple stakeholders (integrators, enterprises, landlords, security providers, etc.).

Although firmly in the identification phase, an access control pilot has already taken place at Richmond International Airport in 2022. Despite the pilot taking place over 2 years ago, it has yet to move to commercial launch.

The access control market is not blessed with an internationally recognized standard (like Europay, Mastercard, Visa (EMV)) and, subsequently, card and reader solutions can greatly differ in terms of reader power. There is no turnkey solution, to date, and a level of customization may be required on a project to project basis. Thus, compared to the payments market, the access control market is extremely fragmented. Each individual project will be small in nature, likely in the tens of thousands per project at most. Given the lower volumes, it becomes less attractive to larger Tier One players, leaving significant opportunity to carve out a new specialist niche for Tier Two and Tier Three vendors.

Given slow decision-making processes and lower volumes per project expectations, the market will only see its first commercial launches starting this year (2025). Growth thereafter will be fast, albeit small in terms of volumes. Given the extended time frames, it is likely that a level of vendor consolidation will take place, which could place further strain on the market from a sourcing and competition perspective.

Ecosystem players need to be mindful about further investment and the end markets on which they place their respective emphasis. Technology readiness and market readiness are clearly not aligned, and although access control has been pitched as a potential market savior, it is ABI Research’s opinion that short- to mid-term emphasis should be placed on unlocking cold crypto wallets in conjunction with FIDO authentication to help address and reduce the growing fraud rates associated with cryptocurrencies.