Smart card vendors advised to shift focus to software and services to sustain growth

Source: Frost & Sullivan

The global smart card market will see steady growth due to the increasing emphasis on the Europay, MasterCard and Visa (EMV) standard in the payment and banking vertical.

In 2015, multiple financial institutions in the US are expected to make their payment cards EMV-compliant. Countries in the Middle East, Africa and Asia-Pacific will follow suit.

New analysis from Frost & Sullivan, 2014 Global Smart Card Forecaster, finds that the market earned revenues of €5.37 billion in 2013 and estimates this to reach €7.16 billion in 2019. The SIM card segment will account for 42.6 percent of the total revenue while the banking and payment vertical will make up 33.5 percent. The smart card government ID and transportation sectors will constitute the rest.

"In addition to the shift to EMV, financial institutions across the globe will migrate to contactless cards, opening up new opportunities for the smart card industry," said Frost & Sullivan Information & Communication Technologies Global Program Director Jean-Noel Georges. "China and Europe, in particular, will lead the way in terms of employment of contactless technologies."

However, this rapid shift to EMV contactless solutions and the associated large volume of shipments will cause pricing pressures in the smart card market, mainly in Asia-Pacific. A similar case is also expected in the US, where the uptake of EMV and contactless solutions has been considerably delayed. With many companies in the US having already invested in EMV in anticipation of a possible migration, it is uncertain whether these firms will have a positive return on investment.

To sustain growth pace, smart card vendors can leverage established relationships with government agencies and transport authorities to upgrade to high-end e-documents and e-ticketing cards, respectively. Building robust partnerships will be especially crucial as the government and ID smart card segment will provide additional avenues for revenue generation through the enhanced driver license (e-DL) and e-ID programs.

"The most prominent e-ID initiatives will take place in India, Turkey and Nigeria," observed Georges. "Meanwhile, the implementation of the e-DL program in the European Union will accelerate the demand for smart card documents in the public sector."

Overall, it is imperative for smart card vendors to switch their core business from physical smart cards to software and services, since the physical smart card market will offer limited growth potential in the long term. This is particularly true since the announcement of a software alternative named Host Card Emulation (HCE) that could threaten the well established hardware embedded security for mobile.

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