Chip card costs delay Asia Pacific implementations

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By: Wise Marketer Staff |

Posted on September 2, 2005

Chip card costs delay Asia Pacific implementations

Security fears are driving the changeover to chip-based cards in the Asia Pacific region, but the move is expensive and using the cards for multiple applications helps justify the extra cost, according to Frost & Sullivan.

Growing apprehensions regarding the security of banking and payment transactions are compelling members of the Asia Pacific financial sector to migrate from magnetic-stripe cards to chip-based cards. Apart from improved security, chip-based cards also help host multiple applications such as automated teller machine, debit, credit, loyalty and transit applications on a single card.

Frost & Sullivan's research found that this migration to chip- or smart card-based cards has been expensive for the involved parties. Companies now have to attempt to optimally use the infrastructure that they invested in to break even or make profits.

Justify investment According to Frost & Sullivan Research Analyst Brian Ooi: "Besides the costs associated with infrastructure and backend system upgrades, the chip cards alone can sometimes cost up to four or five times more than magnetic-stripe cards. Therefore, card-issuing institutions typically attempt to delay the process, as they find it hard to justify the investment."

Although no clear post-migration 'killer applications' have been developed, the industry is definitely moving toward convergence. Industry participants are making dedicated efforts to incorporate multiple applications onto a single card and mount financial applications such as e-purses and credit functions onto a mobile platform.

Enhanced offerings As financial card markets in the Asia Pacific region become mature, competition and innovation will increase correspondingly. This trend is already beginning to manifest in markets such as South Korea and Japan where there are more than 100 million cards in circulation.

"Various card-issuing institutions have started enhancing their product offerings," notes Ooi. "Some efforts on that front include projects such as NTT DoCoMo, Inc.'s Felica card, the Visa Wave contactless pilot tests, and SK Telecom's mobile banking and mobile payment services."

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