October 26, 2017 -
ABI Research has published a new analyst report titled “Next-generation Powered Payment Card Technologies”, which forecasts that 213 million powered payment cards will ship in 2022.
This number is made up of a combination of DCV cards, biometric sensor cards and other interactive powered payment card form factors, a huge increase from the 260,000 expected to be delivered by the end of 2017.
ABI Research explains that payment cards become powered when they take on interactive form factors such as biometric sensors and Dynamic Code Verification (DCV).
While next-generation powered payment cards had been available in the market for a few years, they have largely remained in a dormant phase as vendors continued to research, develop, and define and understand the potential customer base for powered card form factors.
However, there has recently been a rise in the powered card market with several top vendors entering the market including Visa, MasterCard, Gemalto, IDEMIA and FPC.
There are many pilots taking place in countries all over the world, including France, South Africa, Poland, and Norway.
The report states that cost continues to be a significant market barrier, with powered card variants currently commanding average selling prices (ASPs) up to $20 per unit, which is significantly more expensive than the $1 – $2 price point of traditional payment card.
“Although the payment cards market is considered the volume holy grail, cost remains one of the major market barriers because issuers are extremely sensitive to any type of price increase,” Phil Sealy, principal analyst at ABI Research, said. “This comes at a time when significant pressure to ASPs is already being felt in the traditional payment cards market, making a higher value proposition an even harder sell.
“With that said, other end markets, which can command higher ASPs, are presenting a significant opportunity for certain powered payment card variants. The biometric sensor card for example is more than a security hardening payments technology, with potential applications across a multitude of end markets including social/welfare applications, access control, hospitality, and healthcare.”
With price being a key barrier, focus needs to shift to business models and added value in order to prove key differentiators and ultimately determine powered payment card success, the report states.
The majority of issuers are focused on passing on the higher value card costs onto end users by offering a subscription model in exchange for a powered payment card and access to other security features.
ABI Research believes that several business models need to be established from a B2B perspective, designed to target specific use cases and market sub-segments including affluent banking customers via a subscription model, targeted issuance to end users considered most at risk via fraud profiling, and ultimately mass free rollout via a payment as a service approach.
“The ability to offer harden CP and CNP payment authentication may not be enough of a standalone reason for issuers to justify investment into next-generation powered payment card form factors and should be paired with other additional value, including the ability to increase contactless spending limits, multi-application enablement or a segue in which an issuer could look to extend card expiry limits to help spread the higher cost powered card over a longer period,” Sealy said. “For the powered payment cards market, technology and product differentiation will not prove the only defining market factor and vendors offering a selection of creative business models, paired with added value within core offerings will be those which will likely take an early market lead.”
Earlier this year, ABI Research published its latest biometric technologies market data report which forecasts that fingerprint sensors in smartphones will grow significantly to reach a 95 percent penetration rate of smartphone shipments by 2022.