Biometric and DCVV Cards: Understanding the Potential and Limitations of Next-Generation Payment Solutions

The COVID-19 pandemic undoubtedly pressured the payments market to move toward contactless technologies and the removal of physical and touch-centered experiences. As a result, ABI Research anticipates the next few years to be critical for seeing these next-generation payment technologies emerging to mass-issuance levels to transform how the bank customer conducts their business. This resource examines the key opportunities, drawbacks, and movements related to biometric cards and Dynamic Card Verification Value (DCVV) payment cards.

Market Overview

• From the technology segment of the next-generation payment card market, DCVV has emerged as a technique to circumvent CNP fraud and is an offering supported by Tier One smart card solution providers in all regions.
• However, given the presence of mobile DCVV and the migration of the payment card market almost fully away from battery cards, except for the Ellipse DCVV battery-free solution, the DCVV market segment will not see significant growth, climbing from 0.19 million shipments in 2022 to only 0.42 million by 2028.
• On the other hand, the biometric card will see market success, with the biometric payment card segment crossing the 1 million issuance mark in 2024 and accelerating to 37 million shipments in 2028.
• These next-generation card submarkets have been indirectly hampered by the chipset shortage through 2022 with banks’ attention being drawn away from payment card modernization programs, instead attempting to secure a supply of standard payment cards. As allocation began resolving in 2023, card issuers are now refocusing efforts on next-generation card programs.

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“The biometric payment card market is anticipated to continue on a growth trajectory. However, this will occur at a slower pace than was originally expected. Ecosystem vendors are hoping to see 2024 as the year when the 1 million issuance mark is reached and, with pilots active and expanding on a global level; ABI Research does believe this will be the case. ” – Sam Gazeley, Industry Analyst at ABI Research

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Key Decision Items

Recommendation	Details
Use Existing Solutions	Leverage NFC smartphones and contactless technologies for biometric card enrollment solutions.
Capitalize on Contactless Migration	Recognize the increase in contactless adoption in non-mature regions post-COVID-19, expanding the market for biometric and CCVV payment cards.
Engage with Fintech Activity	Focus on neo and challenger banks that aim to build a strong user base. Biometric and DCVV cards appeal to security-conscious customers.
Explore the Cold Wallet Market	Consider the biometric payment card's potential in the cold wallet market, especially as neo and challenger banks enhance their crypto offerings.
Keep the Market Informed	Educate stakeholders (cardholders, merchants, issuers, and vendors) about next-generation technologies, pricing, and launch timelines.
Prioritize Standardization	Address the lack of standardization in biometric cards by offering solutions for both payment and access control markets to maximize volume opportunities.

Defining Next-Generation Payment Card Technologies

ABI Research assessed two key next-gen payment card technologies: biometric smart cards and DCVV payment cards. Below are definitions for each of these banking technologies.

• Biometric Smart Card: Defined as a smart card with a biometric sensor integrated into the card body that leverages biometric authentication as a replacement for the Personal Identification Number (PIN), pivoting the authentication process from “what you know” to “what you are.” This process will be performed most commonly through match-on-card (requiring the cardholder to enroll their biometrics on the card) or sometimes via a biometric database. It is a secure and portable credential that leverages fingerprint biometrics to authenticate the cardholder's identity. Biometric smart cards are used in a variety of end markets, including payments, access control, and identification. ABI Research considers the biometric smart card to be not just a singular product, but a banking solution encompassing a suite of enrollment registry solutions alongside marketing campaigns. The biometric payment card can include a battery (active) or draw power from a reader (passive).
• DCVV Payment Card: A Dynamic Card Verification Value (DCVV) card is defined as a payment card that includes an additional layer of security through the use of a periodically changing debit/credit card verification value, through a display on the screen. The DCVV card replaces the traditional “static” Card Verification Value (CVV) or Card Verification Code (CVC) with one that is “dynamic.”

Identifying the Market Drivers for Next-Generation Payment Cards

Demand for biometric and DCVV payment cards stems from many factors, such as:

• The payment card market, after the COVID-19 pandemic, has become increasinglyhygiene-conscious and has quickly moved to introduce contact-free experiences. This move in the traditional payment card market has extended to next-generation technology payment cards also.
• Issuers benefit from increased security and a lesser risk of fraud from biometric and DCVV cards. As a result, financial institutions can more easily adhere to payment regulations such as the Second Payment Services Directive (PSD2) and Strong Customer Authentication (SCA).
• Contactless transaction limits have climbed significantly and, despite the corresponding increase in the risk of fraudulent activity, next-generation payment cards such as biometric are well placed to mitigate some of this threat.
• Consumers have spent years acclimating to biometric technology and payment through the rise in popularity of mobile Original Equipment Manufacturer (OEM) wallets from Apple and Samsung, familiarizing the target market with using biometrics to pay.
• A biometric payment card requires no change in infrastructure, working seamlessly with Point of Sale (POS) hardware already in place.
• The growth of smartphones in the payment space has contributed to next-generation payment card efforts. A biometric payment card can use a consumer’s Near Field Communication (NFC)-enabled handset to complete a remote enrollment process.

What’s Hindering Demand for Biometric and DCVV Cards?

In this section, we identify the reasons why the adoption of next-gen payment cards hasn’t been as impressive as it could be.

• Chipset Shortage: The chipset shortage did not have as significant an impact on the payment card market anticipated; however, issuer priorities moved away from next-generation technology card launches and toward securing traditional card supply, leading to project postponement.
• Macroeconomic Conditions: Cost of living increases and inflationary pressures have caused consumers to consider their purchases, which has had an impact on how much they are willing to pay for a debit or credit card sporting premium technologies.
• The Mobile Threat: Mobile has given in some areas and taken in others. Biometric and DCVV payment cards have seen their opportunity hampered by the presence of mobile, with mobile DCVV detracting from the market opportunity for the physical DCVV card and biometric payments already available through a mobile form factor.
• Lack of Standardization and Interoperability: For some next-generation technology payment card applications to find a foothold in the market, standardization and interoperability must be in place to avoid market fragmentation and a fear from issuers related to vendor lock-in. The biometric payment card market, for example, enjoys standardized POS terminals from which to harvest power, while the access control market does not.
• No Clear Direction for Enrolling Payment Cards: Enrollment solutions for the biometric payment card are not yet standardized, which is a major issue in end markets such as payments. While enrollment can be conducted in-house for access control, the payment card market requires remote enrollment in the majority of cases. This can only be solved by standardization from an organization such as Europay, Mastercard, and Visa (EMV) as an interoperability leader to align all biometric enrollment solutions under one banner.

Key Market Players to Watch

• Apple Inc.
• Bank of America Corporation
• BBVA
• BNP Paribas
• E Ink Corp
• IDEMIA
• IDEX Corporation
• Samsung
• Visa Inc.
• Zwipe

Dig Deeper for the Full Picture

Download ABI Research's Next-Generation Payment Card Technologies- Biometric and DCVV report to learn more about the value proposition, chip shortage impact, demand forecasts, and technology considerations for these banking solutions. This technology analysis provides the critical insight needed for smart card vendors, secure Integrated Circuit (IC) suppliers, and other vendors within the industry to identify the biggest market opportunities and dynamics shaping next-generation payment solutions.

This content is part of our Next-Generation Payment Card Technologies Research Spotlight