The smart card market was valued at USD 13.18 billion in 2017 and is expected to reach USD 21.57 billion by 2023, at a CAGR of 8.7% during the forecast period. The base year considered for the study is 2017, and the forecast period is between 2018 and 2023.
Market Dynamics: Smart Card Market
Driver: Governments worldwide spend large amount of money for the welfare of their people.
Governments worldwide spend large amount of money for the welfare of their people. According to the Organization for Economic Co-operation and Development (OCED), social benefits provided by governments in developed economies such as European Union and countries such as the US and Japan are more that in developing and underdeveloped economies. Further, according to the World Bank, public healthcare expenditure is high in Europe and North America compared with other regions. Thus, to help avail social benefits, government entities in several countries provide documentations for proper validation of their citizens’ credentials. With the introduction of digitization in government processes, many regional government organizations in these countries have started to provide licenses, and healthcare and social benefit documentations in the form of smart cards to their people. Smart cards aid in the process of digitizing all kinds of identification documents (including facial snapshots and bio-metrics). Further, it is easy for government officials to crosscheck smart card credentials against in-house digital database. MarketsandMarkets believes that the use of smart card-based identity documentations in government processes will increase in the coming years.
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Restraint: High costs involved in deploying EPOS terminals
Usually, large retailers such as McDonalds and Walmart can easily absorb the huge cost involved in deploying contactless EPOS terminals. However, the cost of contactless EPOS is high for small or midsized merchants, and hence these merchants would refrain from deploying such terminals. As a result, they would not be able to reap the benefits of this technology. Also, several small retail merchants rely more on cash transactions than on credit or debit cards for payments. For traditional bank acquirers and contactless payment service providers (PSPs), cash transactions act as a major hindrance in the propagation of card-based acceptance solutions. High capital costs related to acquiring POS machines, recurring maintenance, and difficulty in servicing POS machines in remote areas, along with lack of incentives for merchants to accept contactless card payments, are the major factors limiting the adoption of contactless payment technology in developing countries such as India. Government frameworks and subsidies pertaining to the installation of EPOS terminals for SMBs would promote adoption.
Opportunity: Blockchain technology enhancing security features
Blockchain can be used to generate and store cryptographic keys in smart cards; this would help users authenticate financial transactions by swiping smart cards. A smart card acts as a vault where the cryptographic key can be stored. When the smart card is connected to the Internet via a POS reader, the key stored in the card can be matched with the key stored in the online library, and the authentication of the user would be done. This would help banks and other ecosystem players secure and authenticate user identity in an improved way, thereby reducing cyber theft practices. In 2016, SETL and Metro Bank demonstrated a blockchain-enabled contactless smart card system to help users utilize cash transaction for shopping applications. MarketsandMarkets believes that the use of blockchain technology by smart card providers will increase in the coming years.
Challenge: Security related to contactless technology
Interrupted operations, service denials, covert transactions, and communication links and dual modes are a few security issues facing the contactless smart card market, potentially restricting market growth. The NFC technology and the development of applications to store credit card information could result in privacy issues—theft, regulatory compliance, etc. Failure to protect decrypted data at the contactless payment gateway increases the vulnerability of PSP databases to intruder attacks, potentially resulting in large payment data compromise. These factors have prompted the governments of several countries to cap the maximum limit of contactless payment.
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Key Market Players
Gemalto N.V (Netherlands) , Giesecke & Devrient Gmbh (G+D) (Germany), Idemia (France), Infenion Technologies AG (Germany), NXP Semiconductors N.V. (Netherlands), Sony (Japan), Samsung Electronics (South Korea), HID Global Corporation (Sweden), STMicroelectronics N.V. (Switzerland), Ingenico Group SA (France), VeriFone Systems Inc. (US), Beijeng watchdata Co. Ltd. (China)