A New Payment Card Market Reality Looms—What Do You Need to Be Aware of in the Mid to Longer Term?

Since the COVID-19 pandemic, the payment card market has been through a number of step changes, all of which have impacted the market, mostly negatively.

First, COVID-19 itself was followed by a chipset shortage, and now high levels of inventory and stocking are paired with unfavorable and uncertain macroeconomic conditions, all of which have individually and collectively negatively impacted the market over the past 5 years.

In addition, the market is one of extreme saturation and maturity, with the vast majority driven by replacements of expired payment cards. Weave this into mobile payments and extended expiry and you have the recipe for a market that, at best, can only achieve low single-digit growth on an annual basis.

The year 2023 was fantastic for the payment card market with all ecosystem players reporting stellar results. What wasn’t understood at the time was the fact that increased demand was being driven by extremely high levels of overstocking in a bid for issuers to lock in prices and avoid the situation of the chipset shortage ultimately impacting them again. Nearly all issuers increased their safety stock significantly and likely experienced record levels during this time frame.

With that said, 3.2 billion payment cards shipped in 2023, but the reality of overstocking became clear in 2024, when the market retracted to 3.06 billion as new orders dried up and issuers continued to deplete safety stocks.

It was a common consensus that the market would return to normalcy in 2025, but the impact of overstocking was far more extreme than initially expected, with the situation still impacting it today.  For 2025, the market will be flat at best, most likely decreasing a little when compared to 2025 as the overstocking situation continues to linger.

Moving forward into 2026 and beyond, the market will likely reach a new annual issuance level in the 3 billion to 3.17 billion range and is unlikely to exceed this over the next 5 years. Although 2026 is expected to see a level of market recovery, it won’t be without challenge thanks to a limited replacement opportunity driven by the low level of issuance 5 years prior, during the COVID-19/lockdown period, particularly in China and India.

Given the low levels of growth expected and number of payment card manufacturers competing, it is key to understand what the mid- to longer-term impacts will look like and how to remain relevant in a market in which Average Selling Price (ASP) degradation may exceed volume growth.

Although the first two sections of this ABI Insight paint a very doom and gloom picture, the fact remains that the payment card market is a large one, the second largest smart card market, with finished personalized cards generating revenue in excess of US$4.2 billion annually for the payment card ecosystem.

Therefore, it will remain a key focal area for smart card vendors globally and there are some areas that vendors need to be made aware of and focus on to ensure they can maximize their respective returns and protect revenue streams:

• Indirect Mobile Payments Impact: Despite the increase of mobile payments, issuers continue to issue physical cards. Today, there is no direct link between the increase in mobile payments and a reduction in card issuance, although an indirect impact has been noted, whereby the use of cards has decreased, limiting the opportunity to replace payment cards through typical wear and tear. In addition, workflows are changing, with digital-first approaches being championed, and the physical card following thereafter. This marks a shift in market value and a business transition from physical-first to digital-first, and one that all ecosystem players should be exploring, if they are not already.
• Issuers Are Not Necessarily Replacing Everything: In certain instances, particularly in cost-sensitive regions such as India, issuers are implementing processes of only replacing active cards. This creates forecast uncertainty and vendors should be working closing with issuers to understand current levels of inactive cards in order to better understand potential market impacts down the line.
• Increasing Expiry: Only a few years back, a typical expiration date for a payment card was 3 years. This has now shifted to 4 to 5 years, directly impacting and reducing the replacement opportunity. Malaysia has stated its intent to increase this to 7 years, and although this is not yet confirmed, rumors are beginning to circulate that Japan and Spain may soon follow in a similar direction. A shift from 5 to 7 years could potentially reduce the market size by -20% and close monitoring of this situation and the potential ripple effects across other countries should be put in place to ensure that assets and efforts are redeployed accordingly.
• Sustainability: Eco-cards remain a key topic with a variety of different compositions currently commercially available. Today, Rigid Polyvinyl Chloride( rPVC) is driving the market, thanks to affordability and the fact that the material type can be integrated into existing personalization equipment. Despite this, ABI Research expects that a strategy of removing Polyvinyl Chloride (PVC) in its entirety will begin within the next 5 years, replacing first-use PVC and rPVC with a non-PVC variant, most likely Recycled Polyethylene Terephthalate Glycol (rPETG). For this reason, eco-portfolios should be broad and not limited to one eco-payment card type, with a focus on rPETG to ensure high levels of market readiness once the migration to non-PVC variants begins.
• Post-Quantum Cryptography (PQC)—Is Time Running Out?: The development and implementation of quantum-resistant cryptographic keys should be top of mind for all smart card vendors. Although the impact from the quantum transition may not be felt until sometime in the early 2030s, the time will pass extremely quickly. The fact that quantum computing is potentially only 5 years away makes it today’s problem, given the fact that most payment cards operate on a 4 to 5 year expiration. This is further exacerbated by the fact the payment card market is not accustomed to rapid uptake of new technologies. These factors require a call to arms; educating issuers about PQC transition timelines and outlining the importance of setting the market groundwork today.

Note: This ABI Insight reflects updated data following the publication of ABI Research’s Payment and Banking Card Technologies market data (MD-PBSC-34).