ABI Research predicts that chip card vendors will adopt new form factors

August 9, 2016 - 

ABI Research has released new research that finds that the Chinese and U.S. EMV (Europay-Mastercard-Visa) payment cards markets are experiencing double-digit year-on-year growth, responsible for more than 50% of 2.8 billion EMV cards shipped worldwide.

But as the migration phase for these market regions comes to a close, the industry will soon experience a ripple effect driven by a flattening market in China and a dip in U.S. shipments due to overstocking.

ABI Research finds the proliferating negative discussions among industry players to be over exaggerated and suggests vendors focus on new card form factors and emerging regions to drive future growth.

“Smart card and secure IC vendors like Oberthur Technologies, Gemalto, G&D, Infineon, NXP, and STMicroelectronics now wonder how big the U.S. dip will be and its overall impact on worldwide shipments,” said Phil Sealy, senior analyst at ABI Research. “There remains a real risk that the 2016 dip will extend into 2017 as EMV issuance stabilities, stock levels deplete, and a natural card replacement cycle based on a three-year expiry rate comes into play.”

Vendors are already reporting a drop in U.S. orders, while the CPI Card Group recently adjusted its 2016 earnings expectations downward.

Despite the eventual decrease in unit volume growth, the continued transition toward contactless payment cards with higher associated average selling prices (ASPs) will ultimately help increase revenues, the report said.

Although markets like India will be a strong, emerging growth market, as it recently sets its own EMV mandate, more established and saturated regions will need to consider adopting new biometric and Dynamic Card Verification Value (dCVV) card technologies to drive future revenue growth, according to the report.

New form factors such as biometric cards capitalize on consumer safety and will gain momentum as the focus shifts toward improving physical to CNP (card-not-present) fraud.

In addition, display cards with dCVV and/or one-time password (OTP) functionalities will replace the static three-digit card verification code currently found on the back of debit and credit cards with a small display screen that changes the card holder’s unique card verification code every few minutes.

“The new card models will open up the next wave of revenue growth opportunity within the payment cards market for secure IC and smart card vendors alike,” said Sealy. “Those that already invested in these technologies are well positioned to maximize this next generation opportunity.”

These findings stem from ABI Research’s Payment & Banking Card Technologies and Payment & Banking Card Secure IC Technologies.

Previously reported, ABI Research predicted that consumers who engage with voice functionality on a monthly basis will grow by a CAGR of 80% to reach more than one billion by 2021.

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About Justin Lee

Justin Lee has been a contributor with Biometric Update since 2014. Previously, he was a staff writer for web hosting magazine and website, theWHIR. For more than a decade, Justin has written for various publications on issues relating to technology, arts and culture, and entertainment. Follow him on Twitter @BiometricJustin.